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Sunday, March 8, 2020

Hidden bank fees are a breach of trust

A post on the blog All About Estates recently caught my eye, and I think it will catch the attention of thousands of readers as well. The post, entitled Hidden Fees - A Breach of Trust talks about a brand new decision from the Ontario courts called MacDonald et al v. BMO Trust Company et al.

The lawsuit was brought as a class action suit by 200,000 owners of bank-held, registered assets such as RRSPs. The issue was about hidden fees. Why? Because according to the article, the bank paid itself over $100 million in undisclosed markup fees during the 10 year period in question. The court said that it is clear that when it comes to this type of account, the bank is a traditional trustee and there is no question that traditional trust law applies.

Those of you who have been reading this blog for a while know that trustees are not allowed to profit from being a trustee except as expressly allowed by the trust, by the beneficiaries, or the court. The problem with the bank assets are that the fees are blended and confusing and, as the court said, they were not specifically explained to the customers. Interestingly, the court said that a customer who did their own research and was persistent in asking questions could probably have found out what all the fees were, but the bank was obligated to disclose it, not make people search for it.

The bank's own fee agreement that they give customers to sign specifically says that every fee will be disclosed. They just didn't do it properly and the court said this is a breach of the bank's fiduciary duty to its customers.

In this particular lawsuit, the asset-owners asked for an accounting of the fees. The court agreed to order that accounting. There is now going to be a reference (i.e. an investigation) of the fees to determine the exact amount of fees charged and how to value them. It appears there will be further court involvement before this matter is resolved. I wonder whether once the amount is determined, the court will order that account holders be reimbursed by the banks.

This is an amazing and welcome decision by the court.

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