Canadian Bank Overdraft & NSF Fees: Who’s Affected?
Have you been charged unfair overdraft or NSF fees by your Canadian bank or credit union within the last 5 years?
Take part in the consumer protection movement! Join many others in a Canada-wide investigation to recover unfair overdraft and NSF fees.
Increasing bank fees—including overdraft and non-sufficient funds (NSF) fees—are raising concerns about gouging and unfair practices across the nation.
In 2009, Ottawa-based Democracy Watch broke the silence, alleging that some bank fees are verging on legal grey area. The advocacy group has since been lobbying the federal government to investigate the issue.
According to Radio Canada International this fall, over 95,000 Canadians joined Democracy Watch’s recent letter-writing campaign and petition on the issue at hand.
The group’s co-founder claims that Canada’s big six banks—National Bank of Canada, Royal Bank, BMO, CIBC, Scotiabank and TD— “gouged out record profits of more than $46 billion in 2019,” reports Radio Canada International.
In a stark observation by financial experts and consumer groups, soaring Canadian bank profits seem to parallel increasing bank fees.
According to a 2019 study by NerdWallet examining Canadian bank overdraft charges, the average overdraft fee from some of the largest Canadian banks in September 2019 was $35.
The average overdraft fee from some of the largest Canadian credit unions in the same survey was $26.
The study also showed that 58% of surveyed Canadian banks charging customers overdraft fees also charge “continuous overdraft fees” for accounts that have insufficient funds, which can span several days and accrue even more costs in fees.
Overdraft and NSF fee hikes continue to rake in millions for banks, but these practices have not gone unnoticed. A white paper published by the U.S. Consumer Financial Protection Bureau found that overdraft fees “constitute a significant share of banking sector revenue” and can “cause serious financial harm to the consumers.”
Indeed, Canada’s very own Financial Consumer Agency underscored that overdraft fees need to be studied in Canada and that NSF charges are on the rise.
What Is An Overdraft Fee?
Overdraft fees are charged in the case of an overdraft and occur when you spend more money than you have in your bank account.
Overdraft will cause your account to go into minus. When a customer overdrafts, an overdraft fee will be charged by the bank or credit union to move money to a chequing account to pay for the transaction.
Bank customers may be able to avoid overdraft and other resulting bank fees with overdraft protection. This tool allows customers to cover the amount of the transaction where their accounts are lacking sufficient funds.
However, overdraft protection is a “financial product,” as defined by the Government of Canada, meaning bank and credit union customers will typically need to pay a bank fee for it anyway as an added cost.
What Is An NSF Fee?
The term “non-sufficient funds” (NSF) refers to a situation where an individual has written a cheque but does not have sufficient funds in their bank account to cover the cheque.
When this happens, a bank or credit union will generally charge extra fees to the bank customer who wrote the cheque, as well as to the individual to whom the cheque was payable. NSF cheques are also called “bounced” cheques.
The difference between overdraft and NSF fees is that an overdraft fee will be charged when a payment is accepted and the account goes into minus, whereas an NSF fee will be charged when the payment is rejected and subsequently returned to the chequing account.
Are These Bank Fees Legal?
The legality of Canadian bank overdraft or NSF fees depends on several variables, including provincial law.
Most provinces have specific laws prohibiting abusive or excessive fees. Many of these protections can be found in consumer protection legislation, criminal law, or the civil code, in the case of Quebec. For example, Quebec’s Civil Code prohibits abusive clauses, defined as, “a clause which is excessively and unreasonably detrimental to the consumer or the adhering party and is therefore contrary to the requirements of good faith.” Overdraft or NSF fees, therefore, may be abusive where they are excessively and unreasonably detrimental to consumers.
In British Columbia, the Business Practices and Consumer Protection Act states that creditors, such as banks and credit unions, cannot charge extra fees or penalties for late or missed payments unless one’s situation falls under one of the three following categories: “(a) court ordered costs incurred in collecting or attempting to collect a debt; (b) reasonable charges in respect of costs, including legal costs, incurred in realizing a security interest or protecting the subject matter of a security interest after default; (c) reasonable charges that reflect costs incurred by the credit grantor because a cheque or other payment instrument given by the borrower to the credit grantor was dishonoured.”
B.C. law requires that NSF fees must be reasonable and reflect the costs incurred as a result of the payment. Where NSF fees or other bank fees are deemed “unreasonable,” they may not be legal.
Ontario’s Consumer Protection Act provides for comparable rules as well.
What Overdraft or NSF Fee Lawsuits Have Been Filed?
A number of major banks in the U.S. have also been targeted in several lawsuits over charges of unfair overdraft and NSF fees. Recently, TD Bank agreed to pay $97 million to 1.4 million of its customers for “deceptive marketing tactics” used to sell an overdraft service.
BMO was also hit with a class action lawsuit alleging hidden fees, which reportedly resulted in $102.9 million in profits for the bank.
In 2018, the British Columbia Court of Appeal ruled that Canadian bank overdraft fees can be considered criminal interest. The case that landed before the Court of Appeal was a class action lawsuit alleging that several Canadian credit unions’ fees charged to assess overdraft requests constituted “interest” as per the Criminal Code.
The Court of Appeal referenced the Supreme Court of Canada’s interpretation of “interest” in s. 347 of the Criminal Code as “an extremely comprehensive term,” capturing many transactions including certain overdraft fees.
According to the Court, an overdraft fee can “in substance increases the effective cost of borrowing to the borrower.” Because the bank fees met the definition of “interest,” the Court ruled they could not meet the definition of “overdraft charge,” despite the credit unions’ argument that the overdraft fees were administrative fees.
Following the B.C. Court of Appeal decision, the Quebec Superior Court authorized a class action lawsuit in 2019 against several Canadian banks over abusive NSF fees.
The lawsuit claimed that the NSF fee charged by the Canadian banks—ranging from $40 to $65—contravenes Quebec’s Consumer Protection Act as well as the Civil Code. The reason provided is that the bank fees are excessive and illegal because bank customers have no opportunity to avoid the charge.
Additionally, the Quebec NSF fee class action alleged that the NSF fee of $40 to $60 is abusive and excessive.
The following banks have been targets of overdraft fees and/or NSF fee class action lawsuits:
- Toronto-Dominion Bank (TD)
- Bank of Montreal (BMO)
- Canadian Imperial Bank of Commerce (CIBC)
- Laurentian Bank of Canada
- National Bank of Canada
- Manulife Bank of Canada
- Bank of Nova Scotia
- Royal Bank of Canada (RBC)
- HSBC Bank of Canada
- Tangerine Bank
- Les caisses populaires Desjardins du Québec
Can I Join This Canadian Bank and Credit Union Overdraft & NSF Fee Lawsuit?
If you believe you were unfairly or improperly charged an overdraft fee or NSF fee for any reason by a Canadian bank or credit union within the last 5 years, you could be eligible to participate in this nationwide Canadian Bank and Credit Union Overdraft & NSF Fee class action lawsuit investigation.
Some of the Canadian banks and credit unions being reviewed in this class action lawsuit include (but are not limited to):
- TD Bank
… and more.
This lawsuit investigation is open to all Canadian provinces with a special emphasis on Ontario.
If you qualify, a lawyer will contact you to discuss the details of your potential case at no charge to you. Providing this information does not, however, mean a lawyer has agreed to represent, contact or take action on your behalf.
Fill out the form on the page to find out if you qualify!
Get Help – It’s Free
Join a Free Canadian Bank Overdraft Fee Class Action Lawsuit Investigation
U.S. citizens, click here for the U.S. Bank & Credit Union Overdraft Fees Class Action Lawsuit Investigation.
If you qualify, a lawyer will contact you to discuss the details of your potential case at no charge to you.
PLEASE NOTE: If you want to participate in this investigation, it is recommended that you reply to the law firm if they call or email you.
E-mail any problems with this form to:
After you fill out the form, the lawyers who work with Top Class Actions will contact you if you qualify to let you know if an individual lawsuit or class action lawsuit is best for you.
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The lawyer responsible for the content of this page is Charles Hatt at:
Koskie Minsky LLP
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