Class Action 2959-01-19 Keren Aviv: court holds Mizrahi Tefahot unlawfully charged a warning notice fee

Background and facts: the fee for a notice of exceeding a credit line at Mizrahi Tefahot Bank

On April 5, 2021, Judge Zvi Weizman of the Central District Court (Lod) gave a partial judgment in Class Action 2959-01-19, Keren Aviv v. Mizrahi Tefahot Bank. The judgment allowed the class action and determined how a provision in the bank's fee schedule should be interpreted. The question of the monetary amount was deferred to a later stage.

The fee schedule the bank published to its customers included a note on the fee for a notice of a payment arrear and an excess balance. According to the note, the fee would be charged "from the second notice". The dispute revolved around the question of what a "second notice" is.

According to the judgment, until June 30, 2015 the bank set in its fee schedule for individuals and small businesses a fee of NIS 90 for such a notice or warning. From that date the fee is supervised, and at most NIS 5 may be charged. In the fee schedule for large businesses, a fee of NIS 90 was set.

According to the motion for certification, the plaintiff was charged NIS 5 for a first notice of an excess, and again for a first notice of each new excess that arose after the previous one was covered. According to her, this happened seven times in total, so that she was unlawfully charged NIS 35.

On November 12, 2019, the court certified the claim as a class action. The class was defined as "all the respondent's customers who were charged a fee for a first notice of a payment arrear or an excess balance", in a period starting seven years before the motion for certification was filed. In the certification decision, the cause of action under the Unjust Enrichment Law was rejected.

The parties' arguments: a "second notice" about the same excess or about any excess

The plaintiff's arguments

According to the plaintiff, a "second notice" is a second notice about the same excess itself. If the excess was covered and a new excess arose later, the notice about it is a "first notice" and exempt from the fee. The plaintiff alleged a breach of section 9J of the Banking (Customer Service) Law, breach of contract and a tort cause of action under section 15 of the same Law.

The plaintiff further argued that the mechanism for resetting the count of notices that the bank described does not appear in the fee schedule and is not reported to the customer. In her words, "this is a secret known only to the respondent's computers".

The bank's arguments

The bank argued that the note exempts from the fee only the first notice sent to the customer since becoming a customer. In its words, beyond the letter of the law it resets the count when a year passes without an excess for individuals and small businesses, and after 90 days for large businesses.

The bank argued that the notices the plaintiff pointed to were not the first notices sent to her. It also argued that the fees are a lawful charge for a service and not damage, and that the claim was filed with delay and involves contributory fault. According to the bank, the plaintiff did not file an affidavit and therefore did not prove the intention of the parties.

What the court decided in the partial judgment

No need for an affidavit from the plaintiff

The court rejected the argument that in the absence of an affidavit there is no factual basis. The bank itself admitted that its computer software charged a fee to every customer who received an additional notice in the same year, without checking whether it was the same excess or a new excess. The dispute is therefore solely one of interpretation.

According to the judgment, a fee schedule is a standard contract addressed to the public. It is interpreted according to the understanding of the "reasonable customer", and not according to the subjective intention of the bank or of a particular customer. The court noted that this is not a misrepresentation claim requiring proof of reliance.

Interpreting the fee schedule in the customer's favor

The court held that the plain wording of the note does not support the bank's interpretation. It applied the rule of interpretation against the drafter and the rule that an ambiguous statement in a fee schedule is interpreted in the customer's favor.

Under the bank's interpretation, a customer who exceeded his credit line once a decade ago and corrected it immediately would pay a fee already on the first notice of the next excess. The court found this interpretation less reasonable. It added that the bank itself set reset rules that do not appear in the fee schedule. At the hearing on June 16, 2019, the bank's counsel was asked how the customer knows about the reset, and replied: "He doesn't know it".

The court also noted that different reset periods for individuals and for large businesses may cause an individual customer to pay a fee that a large business would not pay. In its words, this is contrary to section 2(b) of the Fees Rules.

The bank's arguments that were rejected

The court rejected the argument that the programming of the systems proves the bank's intention. It also rejected the argument of a drafting error, and held that the conditions for the exception set out in case law were not met. As to liability itself, the arguments regarding the wording of a 1993 fee schedule, the wording of the notices sent to the plaintiff and the absence of complaints from customers were also rejected.

However, it was held that several circumstances would affect the amount of compensation and not liability itself. Among them were the bank's amendment of the wording of the note after the claim was certified as a class action, the fact that the plaintiff did not approach the bank beforehand, and the fact that this was a benefit the bank gave voluntarily.

The causes of action and the relief

It was held that the class members have causes of action under section 9J of the Banking Law, under section 15 of the same Law together with the Torts Ordinance, and under contract law. Each customer's damage is the fee charged to him for a first notice contrary to the fee schedule.

To calculate the compensation, the number of first notices for which each customer was charged must be identified and multiplied by the fee rate. For this purpose, the court ordered the appointment of an accounting expert who would receive access to the bank's data. A hearing was set for July 20, 2021.

The court criticized the way the plaintiff conducted the proceeding. In its words, had the appointment of an expert been requested before the judgment, it would have been possible to give a complete judgment. Therefore no advances on account of the award and legal fees were awarded at this stage. The bank was ordered to reimburse the plaintiff for the court fee she paid.

Quotes from the decision

"The provision of the bank's fee schedule under which the bank will charge a fee for a payment arrear and an excess balance "from the second notice" shall be interpreted such that the expression "second notice" refers to a second notice in respect of the particular arrear or the particular excess."

Paragraph 56, page 43 of the partial judgment (translated from Hebrew).

"This action of resetting the notices is not mentioned at all in the fee schedule but is a private procedure of the bank"

Paragraph 27, page 20 of the partial judgment (translated from Hebrew).

"In a standard contract, interpretation is made according to its objective purpose, and not according to the subjective thinking of one of the parties to it"

Paragraph 29, page 22 of the partial judgment (translated from Hebrew).

What happened next in the case

According to the supplementary judgment in the case, an appeal filed with the Supreme Court against the partial judgment was dismissed on May 16, 2022 (Civil Appeal 3961/21). On November 15, 2022, an accountant was appointed as trustee to calculate the compensation. On August 27, 2024, the supplementary judgment was given, setting the amount of compensation and the method of payment. Full details are on the page the supplementary judgment: NIS 82.4 million in the Keren Aviv case.

What it means for Mizrahi Tefahot customers

The partial judgment holds that the bank must charge fees according to what is written in its fee schedule, as a reasonable customer understands it. An internal procedure that does not appear in the fee schedule does not change this duty. When the wording of the fee schedule is ambiguous, it is interpreted in the customer's favor.

A customer checking fee charges in his account can compare each charge with the wording of the fee schedule in force at that time. Further fee rulings are collected in the rulings database and on the class actions page.

Sources

• Partial judgment, Class Action 2959-01-19, April 5, 2021 (PDF)
• Supplementary judgment in the same case, August 27, 2024 (PDF), for information on the appeal and the appointment of the trustee

Frequently asked questions about court rulings against Mizrahi Tefahot Bank

How to cite

Class Action 2959-01-19 (Keren Aviv v. Mizrahi Tefahot Bank), Central District Court (Lod), 05.04.2021. Source: Net HaMishpat (Israeli courts database), case Class Action 2959-01-19 (Keren Aviv v. Mizrahi Tefahot Bank).