MAJOR BANKS SUED OVER MORTGAGE PREPAYMENT CHARGES

A Montreal law firm has filed a class-action lawsuit against Canada’s major financial institutions over what the suit describes as “abusive” mortgage prepayment charges. The class action, which will need to be authorized by a judge, argues the country’s major banks charge unreasonable prepayment fees when Quebec homeowners pay off their mortgage before the end of the term. The suit claims banks include clauses in loan agreements that require people who pay off their mortgages early to pay one of two possible penalties, depending on which is highest: three months’ interest calculated on the prepayment amount, or what banks call the “interest-rate differential.” The firm behind the class action, LPC Avocat Inc., contends the latter is virtually impossible to calculate and is always the highest. The suit will aim to have the banks reimburse class members and to have the clause nullified for future loan agreements. It will also seek $100 million in punitive damages.