CIBC Class Action

A class action has been granted in British Columbia against CIBC Mortgage Inc. and their penalty clause provisions of their residential mortgages.

In Sherry v. CIBC Mortgage Inc. 2014 BCSC 1199, Justice Jeanne Watchuk ruled that Erin Sherry is a “very appropriate” representative plaintiff to lead the charge for the class action – so long as she can find an identifiable class that is not too broad. This should not be difficult, and her lawyer has already narrowed it down quite well.

Sherry was charged a $47,868.91 pre-payment fee when she paid her mortgage off in full. The mortgage contract stipulated that penalty fees could be charged for prepayments exceeding 20 percent of the principal in any given year and that the lender would calculate the penalty according to vague and discretionary provisions. This discretion, Sherry’s lawyers argued, made the contract void and unenforceable. Some of the important clauses included phrases such as “discretion to calculation” and a “discretion as to comparison rate”.

Sherry’s lawyers have said that the class would include customers since 2005, keeping in mind the fact that CIBC Mortgage Inc. also offers mortgages through FirstLine Mortgage and President’s Choice. Sherry’s legal counsel is also suggesting that punitive damages are appropriate; they are to file such an application at a later hearing.

Justice Watchuk stated in her June 30 ruling: “Assuming a 10% rate of prepayment each year (which is lower than CIBC’s reported prepayment rate as set out above), there would be between 5,800 and 11,600 prepayments made in British Columbia each year.”

Parallel actions have commenced in Ontario and Quebec.

Greer Jacks is updating jurisprudence in EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.