Ontario Court Allows Proposed Class Action Over Disclosure of Bank Fees
The plaintiff was charged “$96 NSF fee for a single dishonored payment – contrary to the banking agreement and provincial consumer protection law, resulting in unjust enrichment for the bank,” the court noted. court.
The plaintiff attempted to make a purchase for $19.49 through his PayPal account, which was funded by his TD savings account. The transaction was rejected because he only had $19.04 in the account and he was charged an overdraft fee of $48.
Four days later, PayPal again attempted to process the transaction, but it again failed. The plaintiff was charged a second overdraft fee of $48.
“The issue here is not whether PayPal was wrong to re-submit the rejected payment (it was not) or whether the bank was wrong, in theory, to charge a second NSF fee of 48 $ for the additional re-presentation processing fee (was not) – the question is whether the bank fully and fairly disclosed the possible imposition of this second NSF fee in the fee schedule. costs of its consumer banking agreement,” the court noted.
Plaintiff brought the action as a proposed class action on behalf of all TD customers who were charged multiple NSF charges in a single transaction.
The bank argued that the proposed case should be dismissed on the basis that “there is no cause of action in contract, under provincial consumer protection law, or in enrichment without cause”. TD said it was required to treat the second attempt as a separate payment and charge a second NSF check fee under Payments Canada’s “network rules.”
The court rejected this argument, concluding that bank customers cannot be expected to know the network rules of the payment system.
“I agree with plaintiff’s counsel that it would be unreasonable in the extreme to assume that ordinary banking consumers had or should have had a detailed understanding (or all) of the surrounding banking rules and coding requirements set forth in the more than 200 pages of the so-called network rules,” the court said, adding that “there is no chance of a court finding otherwise.”
Additionally, the court found that the network’s rules did not specifically mention NSF fees. The imposition of these charges is entirely the responsibility of the bank, the court said, as is the disclosure provided to customers.
“The bank always had complete control over the words it used and presumably understood their ordinary meaning. Therefore, the bank should not be surprised by a court decision that takes the ordinary meaning of these words seriously and concludes that the choices of words, particularly in the bank charge disclosure provisions, will have consequences,” the court said in its decision.
The court also found that the NSF provision in the standard customer agreement did not disclose that a customer could be hit with a second NSF charge when a third party tries to resubmit a rejected payment.
Therefore, the court concluded that the bank’s motion to dismiss should be denied and the case could proceed to a hearing to determine whether to certify it as a class action.
“The bank has not established that the plaintiff had no cause of action,” the court said in its decision, adding that the imposition of the second NSF tax was not properly disclosed.
The court also noted that a similar case brought in the United States was settled for $41.5 million last year.
“I mention this only to remind all attorneys that the class action proposed here, as it moves forward, need not re-till the ground. It may be useful for both parties to review the quid pro quo process in the United States and determine if or to what extent it may help reduce problems here,” the court said.
The court, meanwhile, ordered the bank to pay $120,000 in costs, saying the attorneys’ “deepening in the rules and standards of the Payments Canada network” increased the costs of the petition for both parties.