CIBC has agreed a $16.5 million out-of-court settlement to end a class action lawsuit over hidden charges for foreign exchange transactions incurred by Visa cardholders.
CIBC has not admitted any liability and says it is settling to avoid further litigation with its cardholders.
The plaintiffs, represented by Paul Pape and Harvey Strosberg, had alleged that the conversion of transactions from a foreign currency resulted in an undisclosed or inadequately disclosed mark up. This mark up was added to the Visa International wholesale conversion rate to obtain the Canadian dollar equivalent for foreign transactions.
If the settlement is approved, the Canadian bank intends to credit Visa cardholders with sums ranging from $.72 to $14.32 depending on the type of card and how long the customer has held it.
In addition, CIBC will also make a payment of at least $1 million to United Way in respect of past and inactive cardholders.
CIBC's settlement should send shivers through the industry. Bundled fees on cards for foreign currency conversions are common practice.
UK consumer group The Independent Banking Advisory Service earlier this week accused UK banks of fleecing holidaymakers and business travellers to the tune of £500m a year by levelling hidden currency charges on card transactions.
In a statement, the group said: "These charges are not clear, not fair and it is about time they stopped."
Research by the Nationwide building society shows a family using a debit card for £1000 of purchases plus two £100 cash machine withdrawals could run up £81 in charges with the Halifax, £58.80p with NatWest and £36 with HSBC, Lloyds TSB and Barclays.