Apr 27: Vancity Position on Overdraft Charge Lawsuit

Vancouver – Vancity Credit Union has been named in a lawsuit that contends the credit union charged overdraft charges that violate a section of the Criminal Code which sets a limit to rates of interest and treats all charges as included within the calculation of interest.

“We often make a decision to honour a cheque for a member who has insufficient funds in their account so that the cheque doesn’t bounce. It’s an extra step to provide service to our members. We charge for that service, but it is much less than the additional charges people could face from us and the merchant when a cheque is returned,” said Vancity CEO Dave Mowat.

“The cost to the individual is much more—in time, money and frustration—if we did otherwise and we think our members would agree with our approach.” Mowat said. “This is the kind of issue that everyone can relate to. Most of us have had a cheque returned at some time in our life and know how frustrating and expensive it can be.”

Vancity’s policy on overdraft charges is that when there are insufficient funds in an account to cover a member’s cheque, the credit union makes a decision to either honour the cheque or return it. Even when the cheque is honoured, Vancity still incurs handling costs. Vancity views this as a service charge, and not as interest.

“We don’t believe we have contravened any law, and that the overdraft charge is in keeping with standard industry practice. We take this lawsuit seriously and are anxious to see it resolved in a way that puts the best interests of members first,” Mowat said.

Over the years, Vancity has worked hard to keep service charges low and to ensure that members pay the lowest fees possible. In 2002, the credit union contacted about 3,000 members to put them in accounts that would allow them to pay the lowest fees possible. Vancity also reduced seven service charges, and eliminated two others on its savings and chequings accounts.

“While we knew this strategy could potentially reduce our earnings by hundreds of thousands of dollars, our approach to our members is to provide value to them. Feedback from our members was very positive and the majority appreciated the proactive approach that Vancity took to help them save money,” Mowat said.

An application by the plaintiff to expand the lawsuit to seven other credit unions has been denied by a BC Supreme Court judge on the grounds that the plaintiff himself was not shown to have any direct relationship with them, and therefore cannot properly advance any claim directly against them.

Vancity is Canada’s largest credit union, with $9 billion in assets, 305,000 members, and 41 branches throughout Greater Vancouver, the Fraser Valley and Victoria. Vancity owns Citizens Bank of Canada, serving members across the country by telephone, ATM, and the Internet. Both Vancity and Citizens Bank are guided by a commitment to corporate social responsibility, and to improve the quality of life in the communities where we live and work.