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The Marcotte and Adams decisions: The constitutional application of provincial consumer protection legislation to banks in matters of credit


November 13, 2009


Donald Bisson
Michel Deschamps


Three class actions decisions (the Marcotte and Adams files) were rendered on June 11, 2009 by the Superior Court of Québec, ordering nine Canadian banks and Desjardins to pay over 200 million. Among the court’s findings:

Provincial consumer protection legislation applies to federal banks in matters of credit and credit cards.

The fees imposed by the banks for the conversion of foreign exchange currency with credit cards are "credit charges" or "interests" within the Québec Consumer Protection Act (CPA). They are not part of the capital.

The facts

These cases pertain to three related (but separate) class actions instituted by consumers against ten financial institutions, namely, nine banks and Desjardins, with respect to the use of Visa, MasterCard and American Express credit cards. The three cases pertain more specifically to the legality of fees or commissions charged to consumers’ credit cards by such financial institutions upon the conversion of foreign currency transactions. The court decided the following:

The conversion fees or profit margins charged to consumers by the banks and by Desjardins for foreign currency transactions made using credit cards are "credit charges" within the meaning of the CPA.

Given that the conversion fees are "credit charges" within the meaning of the CPA, certain banks failed to disclose such fees during the period or part of the period to which the class actions pertain.

The members of the classes did not waive their right to institute the class actions by paying such conversion fees.

The provisions of the CPA and the regulation respecting its application that were invoked are constitutionally applicable and operative as regards the banks, notwithstanding exclusive federal jurisdiction over banking under Section 91(15) of the Constitution Act, 1867 and the doctrine of paramountcy.

By their conduct, the banks and Desjardins contravened certain provisions of the CPA. Consequently, the members of the groups concerned are entitled to the reimbursement of conversion fees that were charged illegally. The banks that omitted to disclose the conversion fees during a certain period were also ordered to pay punitive damages.

McCarthy Tétrault Notes:

What is the importance of these decisions?

The sphere of provincial legislation that could apply to federally regulated banks is now wider than before, so banks should proceed with even greater caution, especially in light of provincial consumer protection statutes and regulation.

The application to various banking practices (such as the use of credit cards) of the notions of "credit charge," "fee related to interest," "non-interest charge," "costs," "interest," etc. have now became unclear, whether they are located in provincial or federal statutes.

McCarthy Tétrault LLP acted for the defendants National Bank of Canada and The Bank of Nova Scotia. All three decisions are currently under appeal before the Court of Appeal of Québec.