What, Banks getting sued, naugh?

I ran across this story last week while listening to the radio, CBC news. I was caught off guard as the story line when something to the effect of “Class action suit against three Canadian Charted Banks are Going before the Courts in Vancouver.� Over the last 2 years, I have being involved personally in litigation with one of those Banks, over similar circumstances and from a academic perspective, in the field of criminology, studying white collar crimes and corporate crimes within Canada. So, to listen to this story play on the radio, really tweaked my attention.

On August 5, 2004 the news broke, sending headlines across the country of a Class-Action suit that will go before the courts in Vancouver involving two women from British Columbia, who both live in the Fraser Valley. Their argument is based around the time that a consumer buys from a merchant, the amount of, and application of, the interest charged by the Bank, or credit card company, and the time in which the merchant actually receives the payment. So the difference is the 1 to 5 days of interest charged on the amount which the Credit Card company actually pays the merchant. Per user, this amount may seem negligible, depending upon the amounts or cost, but over the average annual use, this may add up to millions of dollars for the Banks.

The Canadian free press wrote: “The banks maintain that credit is advanced to the card holder as soon as a purchase is made because that is the date the bank becomes liable for the purchase.� (Theodore, 2004)

Three Major Charted Banks will now have to defend their practices of these interest charges before the courts. As the Statement of Claim reads, The Royal Bank, Canadian Imperial Bank of Commerce (CIBC) and the Bank of Montreal as the Defendants under the __Class Proceedings Act R. S. B. C. 1996 c.15__, law that allows for class action suits in Canada.

The Plaintiffs, Cheryl Dahl and Donna Lewis first tried to sue the Banks in a earlier attempt, March 11, 2002, at the lower court and was dismissed as the Court maintain that the Consumer Protection Act and Bank Act, (or Interest Act) were not being violated. They appealed, and the Appeal Court Judges ordered the trail as they say evidence should be heard to look into the practices of Banks regarding this matter and this gives the green light for a trail.

The crux of the matter are made in three key issues under the Consumer Protection Act, Trades Practices Act and the Bank Act and Interest Act, listed in the statement of Claim. I have condensed and redefined the words used in the Statement of Claim, therefore created a somewhat a summarized version of the legal arguments used:

Consumer Protection Act:
(__citations used: Consumer Protection Act R. S. B. C. 1996 c.69: Sec. 41 &42, Sec. 50.__)

[1] The Defendants, [the Banks] have not given the actual amount of charges of the interest accumulated as stated on the Plaintiff’s agreement with the credit card in their contracts. For example, the “true costâ€? of money collected in the form of interest on money paid to the merchant.
[2] The Defendants did not or “failed as lenders� did not “disclose� the “accurate statement of annual percentage rate� the cost of borrowing, of money from the Credit Card statement given to the Plaintiffs.
[3] The Defendants were given statements of the interest rates, and interest paid, and money borrowed that indicated transactions took place at the time of a each purchase, where in fact, interest that was charged on money that was borrowed several day after each of the transactions. “Back dating interest charges� changes and leads to the increase of the “true rate of interest collect� according to Defendants. (__Consumer Protection Act R. S. B. C. 1996 c.69: Sec. 41 &42, Sec. 50.__)

Under the Trade Practices Act:
(citations used: __Trade Practices Act R. S. B. C. 1996 c.457: Sec 3&4__)

[1] That the Defendants act in a deceptive act of misrepresenting the actual interest rate being collected.
[2] Because of the ambiguity and nature of the agreement between the Plaintiffs and Defendants, the true cost of borrowing were never disclosed.
[3] The terms of the agreements were so “harsh or adverse to each of the plaintiffs as to be inequitable.� Another words, unfair.

Under the Bank and Interest Acts:

[1] The Defendants issued application forms and then Credit Cards, and failed to disclose to the credit card holders the accurate interest cost on money not paid or outstanding and the annual interest rate. (__Bank Act, RSC 1991 c.46__)
[2] Because the Defendants are charging interests on money that has not being advance to the merchants and charging interest on this money before the merchant has received it, the “statement of the stated equivalent yearly rate is inaccurate.�
[3] quoted: “In the alternative, and as a consequence of the failure of each of the defendants to provide an accurate statement of the yearly rate of interest in accordance with Section 4 of the __Interest Act R. S. C. c. I-18__, the defendants are prohibited from charging or recovering interest from the credit card holders which exceeds five percent per annum.�

Sources:

__Dahl & Lewis v The Royal Bank of Canada, The Canadian Imperial Bank of Commerce and The Bank of Montreal__, (2004). (Vancouver Registry: NO. L020712, Supreme Court of British Columbia)

Terri Theodore, August 5, 2004, __Major banks ordered to defend how they charge credit card interest in court__. CanWest Interactive, CanWest Global Communications Corp, Canadian Press.

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2 Thoughts on “What, Banks getting sued, naugh?

  1. Well I think I followed that. It should be an interesting test case. If the women win will this lead to a change in the relevant laws?

  2. Well, Yes, but more importantly, those who have used their credit services in the past may get refunds of moneys taken by these Banks, and will have to change their policy of charging intrest on money that they haven’t given out yet. We are talking millions of dollars, (Pounds in your case)…:dance:

    This could be very bad for the Banks if they are found in breach of over-charging their credit users. :whip:

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