Financial Post, Peter Brieger, 16 November 2007
Two of the country's highest courts paved the way yesterday for a handful of lawsuits to proceed against financial institutions over fees they charge on everything from credit-card cash advances to "buy now, pay later" deals.
The Supreme Court declined to hear arguments that fee-based lawsuits against three companies should be quashed -- giving the claims a green light to go ahead -- while the Ontario Court of Appeal certified a $150-million class-action against Toronto-Dominion Bank over charges it slaps on credit-card purchases in foreign currencies.
While the top court's decision suggests it didn't find the cases were of sufficient national importance to hear them, there is a strong message behind allowing such lawsuits to stay alive, said prominent class-action lawyer Harvey Strosberg, who argued the foreign currency case against TD Bank.
Individual claims in credit-card lawsuits may be small, but they can add up to hundreds of millions of dollars in fees, he noted.
"The courts are being sensitive to the fact that big business can't make millions a few bucks at a time if it's in breach of a contract," Mr. Strosberg said.
In a curious footnote, Ontario's highest court threw cold water on TD's argument that calculating foreign currency fees stretching back to 1968 -- the date picked as a starting point in the lawsuit -- would take 1,500 people working for one year at a cost of $48.5-million.
"It would hardly be sound policy to permit a defendant to retain a gain made from a breach of contract because the defendant estimates its costs of calculating the amount of the gain to be substantial," the appeal court wrote.
The claim was launched by TD Visa cardholder Dr. Paul Cassano over charges from a New York City hotel bill. His claim, launched in 1997, argued that TD Bank breached its credit-card agreement with clients by slapping two "undisclosed" and "unauthorized" sets of fees on customer purchases in foreign currency.
Two lower courts had dismissed the claim, a ruling overturned by the appeal court yesterday.
The appeal court judges ruled that a previous court erred by agreeing with TD Bank's position that calculating any loss would require polling hundreds of thousands of cardholders individually to see if the unauthorized fees would have stopped them from making a foreign currency purchase on their cards.
"It is clear that this error informed [the judge's] ultimate conclusion that this action was not appropriate for certification as a class proceeding," the appeal court wrote.
The ruling comes less than a month after a Quebec Superior Court judge gave the go-ahead to three credit-card lawsuits against dozens of financial institutions, including Bank of Montreal, CIBC, and Royal Bank.
Meanwhile, the Supreme Court refused to hear British Columbia's Coast Capital Savings Credit Union argue against a lawsuit involving a member who sued on behalf of all customers who were charged overdraft fees above $5.
The rulings by the country's top court also cleared the way for a class action to proceed against MBNA Canada Bank over fees and compound interest on its credit-card cash advances.
The court's decision not to hear Merchant Retail Services Ltd.'s appeal means the finance company must pay damages ordered by a lower court over the way it charged late fees under a "buy now, pay later" agreement.
Two of the country's highest courts paved the way yesterday for a handful of lawsuits to proceed against financial institutions over fees they charge on everything from credit-card cash advances to "buy now, pay later" deals.
The Supreme Court declined to hear arguments that fee-based lawsuits against three companies should be quashed -- giving the claims a green light to go ahead -- while the Ontario Court of Appeal certified a $150-million class-action against Toronto-Dominion Bank over charges it slaps on credit-card purchases in foreign currencies.
While the top court's decision suggests it didn't find the cases were of sufficient national importance to hear them, there is a strong message behind allowing such lawsuits to stay alive, said prominent class-action lawyer Harvey Strosberg, who argued the foreign currency case against TD Bank.
Individual claims in credit-card lawsuits may be small, but they can add up to hundreds of millions of dollars in fees, he noted.
"The courts are being sensitive to the fact that big business can't make millions a few bucks at a time if it's in breach of a contract," Mr. Strosberg said.
In a curious footnote, Ontario's highest court threw cold water on TD's argument that calculating foreign currency fees stretching back to 1968 -- the date picked as a starting point in the lawsuit -- would take 1,500 people working for one year at a cost of $48.5-million.
"It would hardly be sound policy to permit a defendant to retain a gain made from a breach of contract because the defendant estimates its costs of calculating the amount of the gain to be substantial," the appeal court wrote.
The claim was launched by TD Visa cardholder Dr. Paul Cassano over charges from a New York City hotel bill. His claim, launched in 1997, argued that TD Bank breached its credit-card agreement with clients by slapping two "undisclosed" and "unauthorized" sets of fees on customer purchases in foreign currency.
Two lower courts had dismissed the claim, a ruling overturned by the appeal court yesterday.
The appeal court judges ruled that a previous court erred by agreeing with TD Bank's position that calculating any loss would require polling hundreds of thousands of cardholders individually to see if the unauthorized fees would have stopped them from making a foreign currency purchase on their cards.
"It is clear that this error informed [the judge's] ultimate conclusion that this action was not appropriate for certification as a class proceeding," the appeal court wrote.
The ruling comes less than a month after a Quebec Superior Court judge gave the go-ahead to three credit-card lawsuits against dozens of financial institutions, including Bank of Montreal, CIBC, and Royal Bank.
Meanwhile, the Supreme Court refused to hear British Columbia's Coast Capital Savings Credit Union argue against a lawsuit involving a member who sued on behalf of all customers who were charged overdraft fees above $5.
The rulings by the country's top court also cleared the way for a class action to proceed against MBNA Canada Bank over fees and compound interest on its credit-card cash advances.
The court's decision not to hear Merchant Retail Services Ltd.'s appeal means the finance company must pay damages ordered by a lower court over the way it charged late fees under a "buy now, pay later" agreement.
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The Toronto Star, Tony Wong, 16 November 2007
As record numbers of Canadians head south for cross-border shopping, a court has ruled that a class-action suit against the Toronto Dominion Bank over foreign currency transactions on its Visa credit cards will be allowed to proceed.
The decision by the Court of Appeal for Ontario, released this week, overturns a lower court ruling that dismissed the certification of a class-action suit by a Toronto doctor who complained about service charges on his TD Visa card.
Dr. Paul Cassano used his credit card to pay for a hotel in New York in 1994. The bill came to $563.36 (U.S.), or $766.62 (Canadian). The hotel mistakenly charged his credit card twice, so Cassano was given a credit.
However, instead of a refund of $766.62, his credit card statement showed he was given $745.44. The difference was in the additional fees charged by the bank for foreign currency transactions.
In July 1997, Cassano and another doctor started a class-action suit against the bank, alleging the "undisclosed practice" of incorporating a conversion fee and an additional issuer fee was "unauthorized" under the terms of the cardholder agreement.
According to the suit, the bank typically has three components to its foreign exchange rate; a basic conversion rate set by Visa International, an additional 1 per cent conversion fee, and an issuer fee ranging from 0.4 per cent to 1 per cent.
Cassano argued that cardholders were blindsided by charges that were far more than a simple conversion rate. The bank claimed the terms of the cardholder agreement provided "broad discretion" to determine the exchange rate applied to foreign currency transactions, and that there was no need for additional disclosure. TD's agreements were eventually amended to include disclosure of the conversion and issuer fees.
"A class proceeding is clearly the preferable procedure," said Ontario Chief Justice Warren Winkler.
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As record numbers of Canadians head south for cross-border shopping, a court has ruled that a class-action suit against the Toronto Dominion Bank over foreign currency transactions on its Visa credit cards will be allowed to proceed.
The decision by the Court of Appeal for Ontario, released this week, overturns a lower court ruling that dismissed the certification of a class-action suit by a Toronto doctor who complained about service charges on his TD Visa card.
Dr. Paul Cassano used his credit card to pay for a hotel in New York in 1994. The bill came to $563.36 (U.S.), or $766.62 (Canadian). The hotel mistakenly charged his credit card twice, so Cassano was given a credit.
However, instead of a refund of $766.62, his credit card statement showed he was given $745.44. The difference was in the additional fees charged by the bank for foreign currency transactions.
In July 1997, Cassano and another doctor started a class-action suit against the bank, alleging the "undisclosed practice" of incorporating a conversion fee and an additional issuer fee was "unauthorized" under the terms of the cardholder agreement.
According to the suit, the bank typically has three components to its foreign exchange rate; a basic conversion rate set by Visa International, an additional 1 per cent conversion fee, and an issuer fee ranging from 0.4 per cent to 1 per cent.
Cassano argued that cardholders were blindsided by charges that were far more than a simple conversion rate. The bank claimed the terms of the cardholder agreement provided "broad discretion" to determine the exchange rate applied to foreign currency transactions, and that there was no need for additional disclosure. TD's agreements were eventually amended to include disclosure of the conversion and issuer fees.
"A class proceeding is clearly the preferable procedure," said Ontario Chief Justice Warren Winkler.
