Credit cards
Canada's big banks have lost an important round in their battle to be excluded from provincial consumer protection laws.
In a Quebec Superior Court judgment, the Big Six banks and Desjardins Group, Laurentian Bank of Canada, Citibank Canada and Amex Bank were ordered to reimburse tens of thousands of credit card customers more than $200-million.
Mr. Justice Clément Gascon ruled that the financial institutions were in "flagrant violation" of the province's consumer protection law when they charged a fee for foreign currency transactions on customers' credit cards.
Lawyers acting on behalf of the customers in three class-action suits argued that the fees were not - as the banks argued - service or administration charges, but were credit charges that are subject to the contract provisions of Quebec's consumer protection law.
Judge Gascon agreed with the argument presented by Quebec's Attorney-General that provincial laws intended to protect the consumer should apply to banks on a broadly defined basis.
For the banks, the biggest concern is not the award, but the judge's refusal to accept their argument that they shouldn't be subject to provincial consumer protection legislation because they operate under federal law.
All provinces have consumer protection legislation and other acts, but the banks historically have not felt the need to abide by them, said lawyers for the banks who declined to be identified.
While this ruling applies only to Quebec, the fear is that it could become a precedent used in other provinces - and force the banks to comply with a patchwork of different rules in 13 provinces and territories, they said.
The institutions will probably appeal, and the case will likely land in the Supreme Court of Canada, one lawyer said.
"This is an extremely important decision," said Pierre-Claude Lafond, a law professor at Université de Montréal.
"It helps clarify the matter but it likely won't be settled until it reaches the Supreme Court," he said.
The Canadian Bankers Association said in a statement yesterday that its member banks "will be reviewing the decision in more detail with their legal counsel and considering its implications and whether or not there is grounds for an appeal."
Bruce Johnston, one of the lawyers acting for the plaintiffs, said in an interview yesterday that the decision clarifies the issue of whether or not Quebec's consumer protection law applies to the financial institutions.
"The judge said you can respect the provincial consumer protection law as well as the federal law," he said.
Under Quebec law, there must be a 21-day grace period for making credit card payments without having to pay a credit charge.
The ruling covers the years 2000 to 2007 and customers who conducted foreign currency transactions over that period using Visa, MasterCard and American Express cards.
The judgment also calls for punitive damages against some of the financial institutions of $25 per customer.
With files from reporter Tara Perkins in Toronto
Bertrand Marotte