Case name:
Mortgage Prepayment Penalties (“IRD”) – Quebec Class Action
Quebec Superior Court file #:
500-06-001166-210
What this case is about:
This class action alleges that major Canadian banks listed below and Desjardins (the “Defendants”) use an unfair and abusive method to calculate mortgage prepayment penalties under the Interest Rate Differential (“IRD”) formula. When borrowers pay off their mortgage early, the banks claim they are only recovering their actual financial loss. However, the class action alleges that the Defendants artificially inflate that loss by reusing an old “discount” applied when the mortgage was first issued, instead of using the discount that actually exists at the time of prepayment. By doing so, the Defendants increase the penalty beyond their true economic loss and earn hidden profits. The class action claims this practice violates banking guidelines and Quebec law, which require that prepayment charges reflect the lender’s real loss – not generate extra revenue.
Authorized Class:
All persons who, since May 31, 2015, paid to one or another of the Defendants (or one of their affiliated companies) prepayment charges calculated using the interest rate differential formula that exceed the lender’s net economic loss, in connection with the full or partial repayment of a fixed-rate mortgage loan or a collateral mortgage on a property located in the province of Quebec.
Remedies sought:
This class action seeks the reimbursement of the amounts overpaid by Class Members to the Defendants listed below on account of abusive mortgage prepayment charges:
- Toronto-Dominion Bank
- National Bank of Canada
- Royal Bank of Canada (and for HSBC Bank Canada as a result of a merger)
- Bank of Montreal
- The Bank of Nova Scotia
- Laurentian Bank of Canada
- Fédération des caisses Desjardins du Québec and all the Caisses Desjardins
Status:
On May 25, 2026, the Court of Appeal of Quebec authorized this class action against all of the banks and all the Caisses Desjardins named as Defendants. A copy of the Court of Appeal’s judgment is accessible here.
