Canada: The Supreme Court Of Canada Rules On The Issue Of "Credit Charges" Pursuant To The "Consumer Protection Act" And The Issuance Of Punitive Damages

In the context of class actions originally initiated before the Quebec Superior Court in 2003, the Supreme Court of Canada ("SCC") has recently confirmed an award against some of the credit card issuing banks for failure to disclose conversion charges charged to credit card holders for purchases made in foreign currencies. In doing so, the SCC addressed the rules concerning the legal standing of class representatives in class actions initiated in Quebec and clarified the rules concerning definitions of "credit charges" pursuant to the Quebec Consumer Protection Act1 ("CPA").


Three decisions were rendered concurrently, which rested for the most part on a common analysis held in Bank of Montreal v. Marcotte2 . The class plaintiffs sought the repayment of conversion charges imposed on them following credit card purchases made in foreign currencies. The case divided the defendant banks into two groups which can be described as follows: Group A was composed of banks which had allegedly failed to disclose the conversion fees in their credit card contracts; and Group B was composed of banks which had allegedly disclosed the conversion fee but did not compute said fees as a "credit charges".

The banks raised two constitutional arguments in order to challenge the application of the CPA to their credit card activities. Both arguments were rejected by the SCC, just as they were by the Superior Court of Québec and the Court of Appeal. The constitutional arguments will not be addressed in this bulletin.3

Standing of Class Representatives in Quebec

While the class actions were initiated against several defendant banks, the two class representatives were card holders of cards issued by only three of the defendants. Thus, certain banks argued at trial that the case ought to be dismissed since the class representatives did not have a sufficient "legal interest' to pursue a claim against them. Essentially it was argued that the class representatives ought to have a direct relationship with each bank to satisfy the criteria of "sufficient interest" and/or "common interest" set out at articles 55 and 59 of the Code of Civil Procedure (CCP). In a 2006 decision4 the Quebec Court of Appeal had ruled that the proposed class representative indeed needed to have a sufficient legal interest against each of the proposed defendants in order to qualify as an appropriate class representative. Subsequent rulings by the Court of Appeal had put into question that rule, thus creating some ambiguity concerning the need for the class representative to effectively have a "legal interest" against each putative defendant.

In Marcotte the SCC took the opportunity to clarify this ambiguity. It noted that article 1051 of the CCP, which addresses class action proceedings, allows the court to adapt the general rules of procedure in order for these to fulfill the intended objective of class action proceedings. The court noted that there is a distinction to be made between, on the one hand, the ability of the representative to obtain a judgment (presumably on the basis of his/her personal claim), and on the other hand, his/her ability to represent a class.5 More importantly, The SCC held that "nothing in the nature of class actions or the authorization criteria requires the representatives to have a direct cause of action against, or a legal relationship with each defendant in the class action".6 Article 1003 of the CCP requires that the representative be an "adequate representative" and also that the action against each defendant involve identical, similar or related questions of law or fact. According to the SCC, allowing a class representative to have standing against multiple defendants is judicially economical, respects the principle of proportionality (article 4.2 of the CCP), and prevents contradictory judgments on similar issues.7

Computation of "Credit Charges"

A substantial issue before the court was to determine whether the conversion fees charged by the banks should be treated as either "net capital" or "credit charges" under the CPA. As per section 69 of the CPA, "credit charges" are fees that consumers, "must pay under the contract" and could be composed of, inter alia, the amount claimed in interest, the premium for insurance, the administration charges, brokerage fees and commission (section 70 of the CPA). The CPA provides that these "charges" must be included in the calculation of the credit rate which must be disclosed to the consumer for the purpose of contracts extending variable credit or contracts involving credit. "Net capital", under the CPA, is defined as "the sum for which credit is actually extended".

The SCC held that classifying the conversion fee as "credit charge" would have impractical and confusing consequences for consumers. Currency conversion is used only by some consumers. Therefore, the credit rate would need to be calculated on an individual basis and based on the use made by each credit card holder every month. Such a spectrum of possible credit rate would not be useful as a point of reference to evaluate the overall cost of using credit through a credit card. Alternatively, if a bank decided to advertise and offer a blended rate, averaging all the users' credit rates, it would force those who do not use the conversion services to subsidize those who do. The most absurd consequence of including the currency conversion fee within the credit charge is the fact that it would be waived if paid within the 21-day grace period. This grace period is the same that applies to interest charges. Thus the SCC ruled that the conversion fee should not be considered a "credit charge" under the CPA.

Failure to Disclose Conversion Fees

The SCC confirmed the Quebec Court of Appeal decision that currency conversion fees constitute "net capital" under the CPA. As such, the conversion fee does not need to be expressed in annual percentage as part of the credit rate, but the fee should have been disclosed to the consumer. The obligation to disclose the conversion charge follows from the general disclosure obligation of section 12 of the CPA. As a result the Group B banks which had disclosed the conversion fee but not computed as a credit charge had not breached the CPA. On the other hand, the Group A banks, which had failed to disclose the conversion fee, had breach breached the CPA. The failure to disclose such fees gives rise to the wide array of recourses pursuant to section 272 of the CPA, including an award in punitive damages. The SCC held that the banks which had breached their obligation to disclose the conversion fee had to restitute the fees they had collected, and they were also subject to punitive damages.

The Court of Appeal had overturned the lower court's decision to impose punitive damages to the banks who had failed to disclose the conversion fees on the basis that the conduct of the concerned banks was not necessarily "reprehensible or antisocial". The SCC reinstated the award in punitive damages against these banks, thus confirming that evidence of antisocial or reprehensible behavior is not required to award punitive damages. Rather, the SCC held that when adjudicating on punitive damages for a breach of the CPA, a court must determine if the merchants (i.e. the banks) displayed a "lax, passive or ignorant attitude" towards the consumer. In this case, the trial judge had found that the Group A banks had not provided any reasonable explanation as to why the conversion fee was not disclosed for several years to their customers. The SCC also disagreed with the Québec Court of Appeal Court of Appeal's reasoning that the mode of recovery (collective or individual) should have an impact on the attribution of punitive damages. The Court of Appeal had held that an award of collective recovery (in this case the restitution of the conversion fee) accomplishes similar goals as an award for punitive damages. The SCC categorically rejects this proposition, and held that the fact that a defendant is ultimately condemned to pay damages on a collective basis rather than an individual basis should have no bearing on the issue of awarding punitive damages. Accordingly, the SCC rules that the Court of Appeal should not have interfered with the first instance judge's decision on this point and restored the award for $25 per class member in punitive damages, for failure to disclose the conversion fees.


Considering there are numerous obligations born by merchants in the disclosure and computation of these charges, this SCC decision is a welcome clarification as to what constitutes a "credit charge" under the CPA and will serve as additional guidance for those drafting and entering into contracts which include an offer for credit, a common occurrence in consumer contracts.

This case reminds us that merchants ought to ensure that their consumer contacts comply with the CPA at the risk of being exposed to punitive damages. The criteria for awarding punitive damages has once again been confirmed and the purported misconduct which could trigger such an award does not need to be as "reprehensible" as it was once thought to be.8

It is too early to tell what overall impact this decision will have with regards to class action in general. It would appear as though purported class representatives are no longer restricted to initiating claims against the party that he/she contracted with or otherwise have a legal relationship with. As a result of this decision, class actions which target entire industries or industry practices may become more common in Quebec.


1. CQLR c P-40.1.

2. 2014 SCC 55. Two other cases also accompany this case : Amex Bank of Canada v. Adams (2014 SCC 56) and Marcotte v. Fédération des caisses Desjardins du Québec (2014 SCC 57). The Class action against Fédération des caisses Desjardins du Québec was brought separately after the banks presented constitutional challenges which were not applicable to Desjardins which, as a member-owned financial cooperative, is not governed by the same regime as chartered banks. The Class action against Amex was brought by non-consumers on different legal basis (art. 1699 of the Civil Code of Québec).

3. For those interested in these issues, we refer you to the following McMillan bulletin

4. Bouchard c. Agropur Cooperative 2006 QCCA 1342.

5. Par. 32.

6. Par. 43.

7. Par. 32.

8. See Richard v. Time Inc., 2012 SCC 8.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2014

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions