2012 QCCA 1395, 2012 QCCA 1395

Unofficial English Translation Fédération des caisses Desjardins du Québec c. Marcotte 2012 QCCA 1395 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-019846-096 (500-06-000223-046) DATE: August 2, 2012 CORAM: THE HONOURABLE ANDRÉ FORGET, J.A. PIERRE J. DALPHOND, J.A MARIE-FRANCE BICH, J.A. FEDERATION DES CAISSES DESJARDINS DU QUÉBEC APPELLANT/INCIDENTAL RESPONDENT - Defendant v.

RÉAL MARCOTTE RESPONDENT/INCIDENTAL APPELLANT – Plaintiff and ATTORNEY GENERAL OF QUEBEC IMPLEADED PARTY – Intervener and PRESIDENT OF THE OFFICE DE LA PROTECTION DU CONSOMMATEUR IMPLEADED PARTY – Intervener JUDGMENT [ 1 ] The appellant appeals from a judgment rendered on June 11, 2009, by the Superior Court, District of Montreal (the Honourable Mr.

Justice Clément Gascon), which allowed a class action on the ground that the appellant had breached the Consumer Protection Act provisions respecting credit charges when it invoiced charges for making foreign exchange payments. [ 2 ] For the reasons of Dalphond J.A., with which Forget and Bich JJ.A. agree: [ 3 ] ALLOWS the appeal, with costs; [ 4 ] DISMISSES the incidental appeal, without costs. [ 5 ] SETS ASIDE the judgment of the Superior Court and, rendering the judgment that should have been rendered, DISMISSES the class action and Mr. Marcotte’s action, with costs. ANDRÉ FORGET, J.A. PIERRE J.

DALPHOND, J.A MARIE-FRANCE BICH, J.A. Mtre.Raynold Langlois Mtre Vincent de l'Étoile Langlois, Kronström, Desjardins

For the appellant/incidental respondent Mtre Bruce W. Johnston Mtre Philippe H. Trudel Trudel & Johnston and Mtre André Lespérance, legal counsel Lauzon Bélanger, Lespérance Inc.

For the respondent/incidental appellant Mtre Jean-François Jobin Mtre Francis Demers Mtre Samuel Chayer Bernard, Roy (Justice Quebec) For the impleaded party (Attorney General of Quebec) Mtre Marc Migneault Allard, Renaud and Associates For the impleaded party (president of the Office de la protection du Consommateur) Date of hearing: September 12 to 15, 2011 REASONS OF DALPHOND, J.A. [ 6 ] The appellant appeals from a judgment allowing a class action and finding that, between 2000 and 2007, it breached the Consumer Protection Act , R.S.Q., c.

P-40.1 ( CPA ), with respect to credit charges. [1] An issuer of Visa cards, it invoiced charges when the cards were used to make payments in a foreign currency (conversion charges). [ 7 ] Based on this observation, the trial judge condemned the appellant to reimburse, through collective recovery, the amount of $28,392,240 to the members of the group for the period between 2004 and 2007.

As for the period between 2000 and 2003, he declared the collection of conversion charges unlawful, but ordered that their recovery be subject to individual claims. [ 8 ] In his incidental appeal, the representative of the group seeks a determination in the amount of $13,102,865 for the period between 2000 and 2003 and an order for the collective recovery of this amount. CONTEXT [ 9 ] The appellant, Fédération des caisses Desjardins du Québec (Desjardins), is a financial services cooperative made up of about four hundred branches in Quebec and twenty or so in Ontario.

It is governed by the Act respecting financial services cooperatives , R.S.Q., c. C-67.3, and overseen by provincial authorities. The Desjardins Movement is one of the most important financial institutions in Quebec and its branches have millions of members. [ 10 ] Among the services offered by Desjardins, although not exclusively to its members, is the possibility of becoming a Visa credit card holder.

In 2007, Desjardins issued 2,834,511 Visa cards, of various types, more than half of which did not have any membership fees. [ 11 ] A Visa card offers its holder various benefits, the best-known of which is the option of paying an amount owed to a business or a service provider that is part of the Visa system. The Civil Code of Québec acknowledges that it is a valid method of payment, on par with cash (

article 1564 C.C.Q. ). The card also enables its holder to obtain cash (cash advances) and even to draw cheques on the credit issued to the holder. In fact, it is an instrument that provides easy access to a predetermined amount of credit granted in Canadian dollars by the issuer. [2] Moreover, this credit is variable since it fluctuates constantly depending on the purchases and reimbursements made by the cardholder. [ 12 ] Because the Visa system spans the globe, the card allows the holder to purchase goods or services in other countries, even using the local currency.

In such a case, when the holder uses a Visa Desjardins card, the sequence of operations is as follows: 1. The cardholder presents the card to the foreign merchant to pay for the good or service 2. The merchant obtains an authorization number by contacting the Visa system; this number is actually given by Desjardins 3. The cardholder manually signs the credit card slip (the merchant then verifies that signature) or the cardholder electronically signs by entering his or her personal identification number (PIN)

4. That same day or soon thereafter, the merchant transmits a claim for payment in paper format or electronically to its financial institution, which thereby acquires the claim (purchaser) 5. That same day or soon thereafter, the purchaser grants the merchant an amount, net of previously agreed upon administrative charges, also referred to as the merchant discount (the purchaser remitting a portion of these charges to the card issuer) 6. The purchaser electronically demands payment from the Visa system and Visa pays the purchaser 7.

Visa invoices Desjardins for an amount corresponding to what it paid to the purchaser, but converted into Canadian dollars, sometimes after an intermediary conversion into American dollars, according to the interbanking rate in effect that day, plus 1.8% (payment of the amounts due to Desjardins as purchaser and by Desjardins as the entity issuing credit to its cardholders occurs mostly through compensation, Visa acting as clearing house for its members) 8.

Desjardins invoices the cardholder for an amount in Canadian dollars that corresponds to the amount it was invoiced by Visa. [ 13 ] Evidence has shown that the conversion rate used by Visa is that in effect between the large banking institutions (interbanking rates) on the date Desjardins is invoiced. The rate is lower than the one usually available to consumers on the market.

The evidence has also shown that this rate, once increased (by 1.8% in the present case) is quite competitive with respect to the exchange rates available to consumers on the market. [ 14 ] Prior to April 1, 2006, the agreement concerning the use of Visa cards issued by Desjardins included the following clauses: [translation] 18. Foreign currency All VISA Desjardins purchases or cash advances made in a foreign currency are payable in Canadian currency converted at the exchange rate in effect as determined by DesjardinsGroup on the date the purchase or cash advance is processed.

The cardholder may write cheques in Canadian currency only. Any cheque written in foreign currency will automatically be returned to the cardholder. 20. Administrative charges Subject to the Consumer Protection Act , cardholders acknowledge that there are administrative charges related to requests for copies of invoices or statements and accept that these charges will be added directly to their Visa Desjardins account. Administrative charges are also due for every transaction, according to the rates indicated on the reverse (or the back) of statements.

Cardholders consent to these administrative charges being added directly to their Visa Desjardins accounts. [ 15 ] Since April 1, 2006, clause 18 has been drafted as follows whereas clause 20 has remained unchanged: 18. CURRENCY CONVERSION SERVICE All VISA Desjardins purchases or cash advances made in a foreign currency are payable in Canadian currency converted at the exchange rate in effect as determined by DesjardinsGroup or its supplier on the date the purchase or cash advance is processed. The cardholder may write cheques in Canadian currency only.

Any cheque written in foreign currency will automatically be returned to the cardholder. The cardholder shall pay a currency conversion charge of 1.8% (one dollar and eighty cents ($1.80) per one hundred dollars ($100) spent) on any amounts recorded in the cardholder’s account in foreign currencies and converted into Canadian dollars. The amount payable in exchange rate charges and the currency conversion charge is deemed to be a regular purchase within the meaning of

Section 9 of this Agreement and will be charged to the cardholder's account on the date the currency is converted. [ 16 ] As for the monthly statement sent to the Visa Desjardins cardholder who has made a payment in a foreign currency, whether before and after April of 2006, it indicates two amounts: the first, in the foreign currency, is the amount paid to the merchant and the second, in Canadian dollars, is the amount invoiced by Visa to Desjardins.

On the back of the statement, under the heading Important information , one can read: [translation] Administrative charges Subject to the provisions of the Consumer Protection Act , the following charges will be charged, as the case may be, to your VISA Desjardins account: - Copy of invoice or statement: $5. - NSF cheques: $20. - Stop payment on a cheque: $10. - Currency conversion: 1.8 % (one dollar and eighty cents ($1.80) per one hundred dollars ($100) spent) [3] on any amounts recorded in the cardholder’s account in foreign currencies and converted into Canadian dollars. - Cash advances: Desjardins network: $1.00 United States: $2.50

Interac network: $1.25 Other countries $3.50 [ 17 ] The respondent, Mr. Marcotte, knew about the charges when he used his card abroad. He was also familiar with the various methods of payment available in those other countries, regularly comparing the conversion rates and charges applying to each of these methods. [ 18 ] In April of 2003, Marcotte's attorneys filed a motion for authorization to bring a class action suit against nine banks doing business in Quebec and Desjardins.

In this action, they sought to have all the conversion charges paid by Marcotte and every other Visa or MasterCard cardholder reimbursed.

This proceeding was subsequently bifurcated into two lawsuits – one against the banks and another against Desjardins – following the decision of counsel for the banks to argue that the CPA did not apply to them because, pursuant to section 91(15) of the Constitution Act, 1867 (U.K.) , 30 & 31 Vict., c. 3, only Parliament may oversee their credit activities. [ 19 ] Despite these two proceedings, Marcotte continued to use his Visa Desjardins card to make payments when in other countries. [ 20 ] In a judgment rendered July 5, 2004, the Superior Court authorized the class action against Desjardins, on behalf of all Visa Desjardins cardholders to whom fees had been charged since April 17, 2000 (the members of the group); a subsequent judgment added an end date, December 31, 2007. [ 21 ] Case management for both this file and that against the banks was assigned to Gascon J., as he then was.

He heard both cases together, in a hearing that lasted thirty-four days during the months of September, October, and November of 2008. [4] [ 22 ] Counsel for Marcotte argued that the charges invoiced by Desjardins upon credit card use to pay in a foreign currency constituted credit charges within the meaning of the provisions set out in the CPA concerning variable credit. Consequently, in order to lawfully claim them, the charges should have been included in the credit rate indicated in the agreement and in the monthly statements.

Furthermore, counsel for Marcotte submitted that credit card holders should benefit from a twenty-one (21) day grace period regarding these charges, which would not be owed if the entire monthly balance was paid off within that time period. Ultimately, they submitted that Desjardins unlawfully collected these charges. It is noteworthy that Marcotte criticizes the banks he is suing in the other class action for the same type of unlawful practices. [ 23 ] The Superior Court judgment, which is 126 pages long, was rendered on June 11, 2009 ( Marcotte v. Fédération des caisses Desjardins du Québec , 2009 QCCS 2743 ).

That same day, the Superior Court also rendered judgment in the case involving the banks ( Marcotte v. Banque de Montréal , J.E. 2009-1225, 2009 QCCS 2764 ). THE IMPUGNED JUDGMENT [ 24 ] After a detailed

summary of the evidence and the parties' arguments, the Superior Court, per Gascon J., concluded that Desjardins had failed to treat the disputed fees as credit charges within the meaning of the CPA : [translation] [638] If, as the Court finds, the conversion charges are indeed credit charges within the meaning intended by the CPA , Marcotte argues that it becomes obvious that Desjardins has breached sections 72, 83, 91, and 92 CPA , as well as sections 55 to 61 of its Regulation. [639] He adds that in doing so, Desjardins also breached sections 126 and 127 CPA and

section 71 of that statute. [640] On this point, the Court agrees with Marcotte. [641] Truth be told, to the extent that the conversion charges are indeed credit charges within the meaning of the CPA , Desjardins does not really dispute that the CPA has been breached, in the circumstances of this case. [642] In such a case, the CPA does indeed oblige Desjardins to compute and disclose conversion charges as being credit charges; that is, in the credit rate expressed as an annual percentage, which includes all of the credit charges actually invoiced.

Sections 72 and 91 of the CPA as well as sections 55 to 61 of its Regulation state this clearly. [643] The only exception that might have been relevant in this case would have been the credit charges that are otherwise included in the credit card's annual fees, as permitted under

section 72 CPA , in which case they need not be included in the credit rate. This exception does not apply to this case with respect to conversion charges. [644] The evidence shows that Desjardins never included the conversion charges in the credit charges. Therefore, it never considered them when establishing the credit rate, which must be expressed as an annual percentage. Having failed to do so, it is obvious that the credit rate indicated in its variable contract of credit violates

section 83 CPA . [645] From this point of view, it is more than a mere computational error. It is a failure to include in the credit charges set out under the CPA certain other charges that form an integral part of those charges. [ 25 ] As for Desjardins's argument that the only applicable remedies are those set out under

section 271 CPA , the judge dismissed it, choosing to follow the majority opinion held in Service aux marchands détaillants ltée (Household Finance) v. Option Consommateurs, J.E. 2006-2099, 2006 QCCA 1319 , to the effect that sections 271 and 272 CPA are mutually exclusive and that

section 271 cannot be applied here. He wrote:

[translation] [657] With respect, the Court finds that the alleged breaches of the CPA respecting disclosure of the credit charges gives rise to the remedies set out under

section 272. [658] That being the case, the absence of prejudice defence raised by Desjardins is irrelevant.

It follows that these breaches allow Marcotte to claim punitive damages on behalf of the members of the group. [659] In the Court's view, Desjardins's failure to disclose the conversion charges as credit charges and its subsequent failure to include them in the credit rate expressed as an annual percentage remain more than mere computational issues or technical breaches. [660] The breach of sections 72, 83, 91 and 92 of the CPA and sections 55 to 61 of its Regulation concerns a specific form of disclosure upon which the legislature insists in order to achieve its objective of offering consumers sufficient information through a global credit rate that includes all credit charges. [661] The objective here is to allow consumers to have a uniform basis for comparison between all the credit cards since all credit charges must be included similarly using a single method of disclosure. ... [673] Even if Desjardins's justification appears legitimate to some since its objective is to have the user support the conversion costs, the breach nevertheless remains wilful.

It knowingly failed to take into account one of the imperatives of the CPA – uniform disclosure to all, in the credit rate expressed as an annual percentage of what is considered a credit charge under the law. [674] Viewed from this angle, it is fair to say that this breaches a fundamental obligation, that of complying with a method of disclosure that is justified because of the legislature's primary purpose, informing the consumer. [675] Thus, despite the emphasis placed on the issue by Desjardins, the notion of absence of prejudice suffered by the consumers becomes moot.

The fact that the product is good or that the conversion rates charged are competitive, even appreciated, has no impact. These observations may influence the right to punitive damages or their quantification, but they do not condition whether the remedies set out under

section 272 CPA will be applied. [676] It is pointless to discuss the issue any further. [677] As for those breaches of the CPA that touch upon substantive conditions, or obligations of conduct, in

section 272 the legislature deems that, in and of themselves, the breaches cause prejudice. [678] The observation is not entirely devoid of common sense. Unlike technical breaches, breaches of this magnitude result in consumers paying charges for which they would not normally be liable, as is the case here.

Therefore, it stands to reason that those consumers are entitled to receive a reimbursement of the amounts invoiced without just cause. [679] If, as Desjardins argues, a party could defend itself by arguing that the charges are competitive, in keeping with what is available on the market, or appreciated by consumers, this would be tantamount to allowing an industry to ignore the CPA based solely on the fact that there is still competition between the main players and that consumers are not harmed because there is nothing better to be had. [680] If that were the case, we can easily imagine the abuses some would give themselves license to perpetrate. [681] Ultimately, Desjardins's breach of sections 72, 83, 91 and 92 CPA and 55 to 61 of the Regulation is subject to the remedies set out under

section 272. This includes the right to restitution of the invoiced conversion charges (section 272( c )) and gives rise to a claim for punitive damages (section 272 in fine ). ... [686] That being so with respect to

section 272, it is pointless to delve any deeper into the other breaches of the CPA (sections 71, 126 and 127 CPA ), which, according to the acknowledgements made by counsel for the plaintiff, remain subject to the less strict sanctions provided under

section 271 CPA . [698] Obviously, since the Court finds that there is no evidence that Desjardins breached sections 12, 219 or 218 CPA , it is pointless to determine whether these sections remain subject to the remedies of sections 271 or 272. [ 26 ] According to the evidence, the judge found that the conversion charges collected between 2004 and 2007, which he estimated amounted to $28,392,240, were subject to collective recovery.

With respect to the period between 2000 and 2003, he deemed the evidence too incomplete to determine the total amount of the claim because of prescription that varied for each member; he therefore ordered individual recovery for the conversion charges collected during that period. [ 27 ] Finally, he dismissed the claim for punitive damages citing the extent of the reimbursement obligation, the conduct of Desjardins(who never hid the charges), the usefulness of the card when abroad, the fact that consumers were not exploited or encouraged to get into debt, and the exceptional nature of such damages.

GROUNDS OF APPEAL [ 28 ] Desjardins submits two main grounds, the first relating to an

interpretation of the CPA and the second, to an

interpretation of the

Constitution Act, 1867 . Alternatively, Desjardins argues partial prescription of the action, waiver of any reimbursement (or acquiescence to the charges), and the inappropriate nature of collective recovery. [ 29 ] On the first main ground, it argues that the conversion charges must be considered to be a component of the net capital extended within the meaning of

section 68 CPA and not credit charges pursuant to sections 69 and 70 CPA . Alternatively, if they are charges, they are nevertheless not credit charges within the meaning of the CPA . In short, they constitute a category of charges that is not covered by sections 69, 70, 72, 83, 91, 92, 126 or 127 CPA . It adds that, should the Court find that they are credit charges within the meaning of the CPA , the alleged breaches are governed by

section 271 CPA , not 272, and it would be appropriate, in that case, to apply the third paragraph of that provision (the consumer suffered no prejudice) and in so doing, set aside the condemnations. [ 30 ] On the second main ground, it submits that using a credit card is in fact an operation akin to bills of exchange or promissory notes within the meaning of section 91(18) of the Constitution Act, 1867 . It follows, in Desjardins's view, that the regulation of this activity falls under federal jurisdiction.

The CPA provisions at the heart of the present dispute therefore do not apply to credit card use, which must be distinguished from the granting of variable credit, such as drawing a cheque on the variable credit in question. [ 31 ] Incidental appellant Marcotte, for his part, argues that the judge erred by finding that between 2000 and 2003 he knew the rates applicable to foreign currency payments and that his action was therefore prescribed for that period, pursuant to former

section 273 CPA . Moreover, the judge also erred in accepting that this might be the case for other members of the group. It follows, in his opinion, that the judge should have ordered collective recovery for the 2000-2003 period and condemned Desjardins to pay an additional amount of $13,102,865. ANALYSIS I.

The charges imposed by Desjardins [ 32 ] In this case, the judge concluded from the evidence that it was Desjardins who imposed the 1.8% conversion charge on its Visa cardholders, not the Visa system, and that these charges were remitted to Desjardins via the Visa system. [ 33 ] This conclusion is well founded with respect to the 0.8% that is added by Visa following the conversion of the foreign currency into Canadian dollars.

Indeed, the evidence shows that this increase occurs at Desjardins's request and for its sole benefit. [ 34 ] At first glance, the same cannot be said of the 1% charged by Visa pursuant to the agreement between Visa and the financial institutions that adhere to its system. Since this amount is imposed by a third party and is included in the total amount invoiced to Desjardins for the conversion operation, it does not indicate charges imposed by Desjardins to its clients but an upstream cost, charged by the conversion service supplier.

The evidence shows, however, that 90% of this amount is remitted by Visa Canada, a not-for-profit organization, to the participant financial institutions. [ 35 ] Overall, the 1.8% increase is almost entirely for Desjardins's benefit.

The situation is similar to the MasterCard system, where MasterCard claims from participating financial institutions only the amount converted into Canadian dollars according to the interbanking rate, and the institutions in question then increase this amount before invoicing their cardholders. [5] [ 36 ] In these circumstances, the trial judge could find that the 1.8% added by Visa to the amount resulting from the application of the interbanking exchange rate was, in fact, imposed by Desjardins. II.

The alleged breaches of the CPA [ 37 ] The CPA states that all charges imposed by a merchant must be reasonable (section 8) and can be claimed only if they are indicated in the agreement (section 12). The CPA also requires disclosure in dollars and cents of all the credit charges (section 71).

In the present case, the judge concluded that Desjardins had complied with these provisions. [ 38 ] The breaches accepted by the judge are on another level: They are Desjardins’s failure to include the charges imposed when a Visa card is used to make a foreign currency payment in its computation of the credit rate expressed as an annual percentage (section 72) and its collection of these charges even though

section 126 sets a twenty-one day grace period with respect to credit charges . This means, practically speaking, that the conversion charges cannot be claimed from cardholders who pay off their balance within that time period, which, according to the evidence, is about 50% of Visa Desjardins cardholders. Also,

section 83 CPA does not allow for claiming credit charges that are not included in the indicated credit rate. [ 39 ] The dispute therefore turns on the

interpretation to be given to the expression " credit charges " for the purposes of applying the CPA . III. Conversion charges are not credit charges

[40] Need we reiterate that legislative

interpretation is governed these days by a single overarching principle: “... the words of an Actare to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object ofthe Act, and the intention of Parliament” (Elmer A.

Driedger, Construction of Statutes, 2d ed. (Toronto: Butterworths, 1983) at 87;Pierre-André Côté in collaboration with Stéphane Beaulac and Mathieu Devinat, Interprétation des lois, 4th ed., (Montreal: Thémis,2009) paras. 1086 and following, at 331 and following; Rizzo & Rizzo Shoes Ltd. (Re), (SCC), [1998] 1 S.C.R. 27 atpara. 21). [41] The CPA is protective legislation purposing to better inform consumers and restore balance between them and merchants(Claude Masse,

Loi sur la protection du consommateur: analyse et commentaires (Cowansville, Que.: Yvon Blais, 1999) 94; NicoleL'Heureux & Marc Lacoursière, Droit de la consommation, 6th ed. (Cowansville, Que.: Yvon Blais, 2011) 26 at para.17). As itsobjective is to prevent abuses and secure advantages for consumers, it must receive a broad and liberal

interpretation that ensures "theattainment of its object and the carrying out of its provisions, according to their true intent, meaning and spirit" (Interpretation Act,R.S.Q., c. I-16, s. 41), without perverting it. [42] The relevant provisions of the CPA are the following: 1. Dans la présente loi, à moins que le contexten'indique un sens différent, on entend par: ...

f) «crédit»: le droit consenti par un commerçantà un consommateur d'exécuter à terme uneobligation, moyennant des frais;

SECTION III CONTRATS DE CRÉDIT 66. La présente

section vise tous les contrats decrédit, notamment:

a) le contrat de prêt d'argent;

b) le contrat de crédit variable;

c) le contrat assorti d'un crédit. § 1. — Dispositions générales 67. Aux fins de la présente section, on entendpar:

a) «obligation totale»: la somme du capital netet des frais de crédit;

b) «période»: un espace de temps d'au plustrente-cinq jours;

c) «versement comptant»: une somme d'argent,la valeur d'un effet de commerce payable àdemande, ou la valeur convenue d'un bien,donnés en acompte lors du contrat. 68. Le capital net est:

a) dans le cas d'un contrat de prêt d'argent, la 1. In this Act, unless the context indicatesotherwise, ... (f) “credit” means the right granted by amerchant to a consumer to perform an obligationwithin a term in consideration of certain charges; DIVISION III CONTRACTS OF CREDIT 66. This division contemplates all contracts ofcredit, particularly (

a) contracts for the loan of money; (

b) contracts extending variable credit; (

c) contracts involving credit. § 1. — General provisions 67. For the purposes of this division, (a) “total obligation” means the aggregate of thenet capital and the credit charges; (b) “period” means a space of time of not overthirty-five days; (c) “down payment” means a sum of money, thevalue of a negotiable instrument payable ondemand, or the agreed value of goods, given onaccount at the time of the contract. 68. The net capital is (

a) in the case of a contract for the loan ofmoney, the amount actually received by the

somme effectivement reçue par le consommateur ou versée ou créditée pour son compte par le commerçant;

b) dans le cas d'un contrat assorti d'un crédit ou d'un contrat de crédit variable, la somme pour laquelle le crédit est effectivement consenti . Toute composante des frais de crédit est exclue de ces sommes. 69. On entend par « frais de crédit » la somme que le consommateur doit payer en vertu du contrat, en plus :

a) du capital net, dans le cas d'un contrat de prêt d'argent ou d'un contrat de crédit variable ;

b) du capital net et du versement comptant dans le cas d'un contrat assorti d'un crédit. 70. Les frais de crédit doivent être déterminés en incluant leurs composantes dont, notamment :

a) la somme réclamée à

titre d'intérêt;

b) la prime d'une assurance souscrite, à l'exception de la prime d'assurance-automobile;

c) la ristourne;

d) les frais d'administration, de courtage, d'expertise, d'acte ainsi que les frais engagés pour l'obtention d'un rapport de solvabilité;

e) les frais d'adhésion ou de renouvellement;

f) la commission;

g) la valeur du rabais ou de l'escompte auquel le consommateur a droit s'il paye comptant;

h) les droits exigibles en vertu d'une loi fédérale ou provinciale, imposés en raison du crédit. 71. Le commerçant doit mentionner les frais de crédit en termes de dollars et de cents et indiquer qu'ils se rapportent:

a) à toute la durée du contrat dans le cas d'un contrat de prêt d'argent ou d'un contrat assorti d'un crédit; ou

b) à la période faisant l'objet de l'état de compte dans le cas d'un contrat de crédit variable . 72. Le taux de crédit est l'expression des frais de crédit sous la forme d'un pourcentage annuel . Il doit être calculé et divulgué de la manière prescrite par règlement. consumer or paid into or credited to his account by the merchant; (

b) in the case of a contract involving credit or a contract extending variable credit, the sum for which credit is actually extended . Every component of the credit charges is excluded from this sum. 69. “Credit charges” means the amount the consumer must pay under the contract in addition to (

a) the net capital in the case of a contract for the loan of money or a contract extending variable credit ; (

b) the net capital and the down payment in the case of a contract involving credit. 70. The credit charges shall be determined as the sum of their components, particularly the following: (

a) the amount claimed as interest; (

b) the premium for insurance subscribed for, except any automobile insurance premium; (

c) the rebate; (

d) administration charges, brokerage fees, appraiser's fees, contract fees and the cost incurred for obtaining a credit report; (

e) membership or renewal fees; (

f) the commission; (

g) the value of the rebate or of the discount to which the consumer is entitled if he pays cash; (

h) the duties chargeable, under a federal or provincial Act, on the credit. 71. The merchant must state the credit charges in terms of dollars and cents, and indicate that they apply (

a) to the entire term of the contract in the case of a contract for the loan of money or a contract involving credit, or (

b) to the period covered by the statement of account in the case of a contract extending variable credit .

Pour le calcul du taux de crédit dans le cas d'un contrat de crédit variable, on ne tient pas compte des composantes suivantes des frais de crédit :

a) les frais d'adhésion ou de renouvellement; et

b) la valeur du rabais ou de l'escompte auquel le consommateur a droit s'il paye comptant. 81. Un contrat de crédit, à l'exception d'un contrat de crédit variable, ne doit indiquer qu'un seul taux de crédit. 83. Le commerçant ne peut exiger sur une somme due par le consommateur des frais de crédit calculés suivant un taux de crédit plus élevé que le moindre des deux taux suivants : celui calculé conformément à la présente loi ou celui qui est mentionné au contrat. 91. Les frais de crédit doivent être calculés selon la méthode de type actuariel prescrite par règlement. § 3. — Contrats de crédit variable 118.

Le contrat de crédit variable est le contrat par lequel un crédit est consenti d'avance par un commerçant à un consommateur qui peut s'en prévaloir de temps à autre, en tout ou en partie, selon les modalités du contrat . Le contrat de crédit variable comprend notamment le contrat conclu pour l'utilisation de ce qui est communément appelé carte de crédit , compte de crédit, compte budgétaire, crédit rotatif, marge de crédit, ouverture de crédit et tout autre contrat de même nature. 119. Aux fins de l'article 118, constituent des frais de crédit les pénalités imposées en cas de non-paiement à l'échéance. 72.

The credit rate is the amount of the credit charges expressed as an annual percentage . It must be computed and disclosed in the manner prescribed by regulation. In computing the credit rate in the case of a contract extending variable credit, the following components of the credit charges are not considered : (

a) membership or renewal fees; and (

b) the value of the rebate or of the discount to which the consumer is entitled if he pays cash. 81. Contracts of credit, except contracts extending variable credit, must stipulate only one credit rate. 83. The merchant shall not exact, on a sum owing by the consumer, credit charges computed at a higher credit rate than the lesser of the two following rates : that computed in accordance with this Act and that stated in the contract. 91. The credit charges must be computed according to the actuarial method prescribed by regulation. § 3. — Contracts extending variable credit 118.

A contract extending variable credit is a contract by which credit is extended in advance by a merchant to a consumer who may avail himself of it, in whole or in part, from time to time, in accordance with the terms and conditions of the contract . Contracts extending variable credit include, in particular, contracts made for the use of what are commonly called credit cards , credit accounts, budget accounts, revolving credit accounts, marginal credit and credit openings and any other contract of similar nature.

126. À la fin de chaque période, le commerçant, s'il a une créance à l'égard d'un consommateur, doit lui fournir un état de compte, posté au moins vingt et un jours avant la date à laquelle le créancier peut exiger des frais de crédit si le consommateur n'acquitte pas la totalité de son obligation ; dans le cas d'une avance en argent, ces frais peuvent courir à compter de la date de cette avance jusqu'à la date du paiement. L'état de compte doit mentionner:

a) la date de la fin de la période;

b) le solde du compte à la fin de la période précédente en spécifiant la

partie de ce solde que représentent les avances en argent consenties;

c) la date, la description et la valeur de chaque transaction portée au débit du compte au cours de la période, sauf si le commerçant

annexe à l'état de compte une copie des pièces justificatives;

d) la date et le montant de chaque paiement effectué ou de chaque somme créditée au cours de la période;

e) les frais de crédit exigés pendant la période ;

f) le solde du compte à la fin de la période;

g) le paiement minimum requis pour cette période; et

h) le délai pendant lequel le consommateur peut acquitter son obligation sans être tenu de payer des frais de crédit sauf sur les avances en argent . Le consommateur peut exiger du commerçant qu'il lui fasse parvenir sans frais une copie des pièces justificatives de chacune des transactions portées au débit de son compte au cours de la période. [Emphasis added.] 119. For the purposes of

section 118, penalties imposed for non-payment at the expiry of the term constitute credit charges. 126. At the end of each period, the merchant must furnish the consumer who owes him a debt with a statement of account, mailed not less than 21 days before the date on which the creditor may impose credit charges, if the consumer does not discharge his obligation in full ; in the case of an advance of money, these charges may accrue from the date of that advance until the date of payment. The statement of account must indicate: (

a) the date of the end of the period; (

b) the balance of the account at the end of the preceding period, specifying the portion of the balance which is represented by moneys advanced; (

c) the date, description and value of each transaction debited to the consumer's account during the period unless the merchant appends a copy of the vouchers to the statement of account; (

d) the date and amount of each payment made or sum credited during the period; (

e) the credit charges required during the period ; (

f) the balance of the account at the end of the period; (

g) the minimum payment required for such period; and (

h) the time during which the consumer may discharge his obligation without being required to pay credit charges except on advances of money . The consumer may require the merchant to send to him without charge a copy of the vouchers for each of the transactions debited to the consumer's account during the period. [ 43 ] It appears from sections 67 and following that the amounts charged to a consumer's account in the context of a variable contract of credit tied to a credit card are considered either net capital or credit charges . [ 44 ] It also appears from the use of the word "particularly" in the introductory paragraph of

section 70 CPA that the legislature intended for an unrestrictive

interpretation of what constitutes credit charges . From the enumeration in this provision, it appears that these charges may be grouped into two categories: (

i) charges related to the steps leading up to credit access, such as fees to open files or

other administrative charges, fees to obtain a solvency report, membership and renewal fees, and commission, and (ii) subsequent charges related to credit use, such as amounts claimed as interest, insurance premiums guaranteeing that the capital will be reimbursed and credit charges paid in the event of invalidity or death, the discount that the consumer using credit will not receive as opposed to the one he would be entitled to if he were paying cash, [6] and the statutory fees due and imposed because of the credit. All the charges listed in

section 70 that are not included in one or the other of these categories must be considered credit charges . [ 45 ] Also, except for membership and renewal fees, credit charges must be considered when computing the credit rate applicable to the credit extended and must be included therein (section 72). In fact, to better inform the consumer, the legislature requires that credit charges be included in the credit rate disclosed to the client according to a specific method.

This is not without consequences since the consumer does not have to pay more than the lesser of the stated rate or that computed under the CPA (section 83). In the case of a credit card, the issuer may indicate, as needed, more than one such rate (section 81). [ 46 ] This does not entail, however, that all the charges invoiced to consumers in the context of a contract of credit necessarily fall under the category of credit charges.

Thus, the charges invoiced to obtain a copy of a lost monthly statement, to stop payment on a cheque drawn on the Visa Desjardins account or to obtain an additional card cannot be considered to be charges leading up to the granting of credit or charges imposed as a result of that credit being granted.

Certainly, these are charges related to the existence of the contract of credit , but they have no common denominator with charges invoiced because the credit was used (such as interest) or with charges leading up to the granting of credit. [ 47 ] The same is true of the charges related to using an automated teller machine (ATM). If consumers go to their branch's counter to withdraw funds from their credit card, they might not be charged. If they use a Desjardins ATM, they will be charged one dollar; if they prefer to use another financial institution's ATM, these charges will be higher.

In any event, the fees charged are not related to the available credit granted, but are a consequence of the consumers' choice to avail themselves of a service, namely, computerized access to this credit through ATMs, including those of other institutions. In other words, consumers are invoiced charges according to the user-pay model. [ 48 ] As counsel for the Office de la protection du consommateur (OPC) acknowledges before us, the imposition of such charges is not prohibited by the CPA .

On the contrary, when the legislature intends to prohibit charges, it does not hesitate to legislate, as it did with respect to receiving copies of slips, for example. Indeed,

section 126 in fine prohibits any charges in this respect. [ 49 ] These charges, although not credit charges , must however be reasonable, like any invoiced charge (section 8), and be specified to consumers (section 12). [ 50 ] In this case, the same applies to the charges exacted when the consumer opts to use the foreign currency payment option tied to his or her Visa card rather than paying a foreign merchant offering that option in Canadian dollars ( Dynamic Currency Conversion , hereinafter "dynamic conversion") or using the local currency obtained at a currency exchange office or at an automated teller machine.

The consumer is then using a service tied to his or her card, that is, payment in a currency other than the one identified in the contract of credit. [ 51 ] It goes without saying that using this service requires that the amount paid be converted into Canadian dollars, the only valid currency where the cardholder resides and the only one that may be used to lawfully repay Desjardins (article 1564 C.C.Q. ).

Unless the amount of credit granted associated with a card is in a currency other than Canadian dollars, all the amounts charged to the holder's account must be in Canadian dollars and are due by that holder in Canadian dollars. In the present case, this conversion is performed according to a method that was at all relevant times disclosed by Desjardins and known by Marcotte. Also, Desjardins invoiced currency conversion charges according to rates that were well-known by Marcotte. [ 52 ] These fees are not charged to access the credit or to guarantee its reimbursement.

Instead, they stem from using an incidental service offered to cardholders, much like access to millions of ATMs in foreign countries to obtain local currency cash advances, a service which is also subject to a charge. [ 53 ] In fact, if these conversion charges were considered to be credit charges , the total obligation , within the meaning of

section 67 CPA , of consumers for a single transaction performed with a Visa card would vary depending on the chosen method of payment while abroad. Thus, consumers paying with foreign currency would have a total obligation made up of two elements: the amount converted into Canadian dollars ( net capital ) and the conversion charge ( credit charges ).

However, consumers paying in Canadian dollars prevailing themselves of the dynamic conversion service offered by the foreign merchant would have a total obligation comprising only one element: the amount invoiced in Canadian dollars by the merchant in question (the net capital advanced within the meaning of the CPA ), which would include all the fees charged by the said business. In the first case, a portion of the total obligation becomes irretrievable if the consumer pays within twenty-one days; in the second, the whole obligation remains due. [ 54 ] This result raises the question of the value of the

interpretation proposed by Marcotte. It seems more logical to me to accept that the conversion charge, whether imposed by the foreign merchant or by Visa on behalf of Desjardins, is consideration for the conversion service performed.

It is up to cardholders to chose whether to avail themselves of a service related to their card and offered by Visa (the foreign currency payment) or of an equivalent service offered by a third party (the foreign merchant) or even to pay cash with the local currency after stopping by a currency exchange office (or an ATM), or to use traveller's cheques made out in that local currency.

In any of these situations, the person is aware that there are charges associated with the service. [ 55 ] Also, if the conversion charges were considered credit charges , the credit rate that Desjardins would have to indicate to Visa cardholders prior to any use (sections 72 and 81) would have to be expressed as an annual percentage varying between 18% [7] and 900%, depending on the date on which the card was used to make a foreign currency payment. This information would of course be likely to confuse consumers rather than inform them.

Counsel for the OPC acknowledges this from the outset, adding that the charges associated with using the option of paying in a foreign currency, if invoiced as a percentage of the amount converted into Canadian dollars, do not lend themselves to inclusion in the computation as a percentage of the credit charges . As for the federal regulator, which is well-aware of this reality, it requests that the institutions it governs inform it of not only the interest applicable to the credit, the

minimum payment, and the grace period, but also "the nature and amounts of any non-interest charges", which include conversion charges ( Cost of Borrowing (Banks) Regulations SOR/2001-101, as amended, sections 10 , 11 , and 12 ). [ 56 ] Finally, even if Desjardins were to include these conversion charges in its computation of the credit rate and indicate it on its statements as an annual percentage, it remains that, under

section 126 CPA , the consumer must benefit from a twenty-one-day grace period with respect to any and all credit charges , which are not owed if the entire obligation is paid off during that period. It follows that, in practice, such charges, if they are likened to credit charges , could not be invoiced lawfully pursuant to the CPA (at least to the 50% of Desjardins clients who pay off the balance each month and who would thus benefit from a free service). [ 57 ] This is in fact the position submitted by counsel for Marcotte.

In their view, if Desjardins wishes to recoup the charges associated with payments made in a foreign currency, it must increase either the membership fee [8] or the contractual credit rates . [9] In other words, it must require that all cardholders pay for the service, regardless of whether or not they use it (5% of Visa Desjardins cardholders make foreign currency purchases), or pass the cost of the service onto the consumers unable to pay off their balance within the grace period (the other 50% of Visa Desjardins cardholders who do not pay off their entire balance within that time frame). [ 58 ] In both cases, the charges would be shouldered not by those who use the service, but by third parties.

Moreover, since the CPA does not oblige the issuer to describe how the membership fees or the credit rate are established, the existence of such charges and their recovery by Desjardins would henceforth be hidden from consumers. [ 59 ] Ultimately, if we set aside the user-payer method, the remaining options appear contrary to the purposes of the CPA : (

i) the credit rate scale is indicated but devoid of any real meaning for the consumer, (ii) the charges associated with foreign currency payments are transferred to the most vulnerable consumers, (iii) interest rates or membership fees are increased but financed by those who do not use the service, (iv) there is nonexistent transparency (when the cost is integrated into the credit rate), and so on. [ 60 ] In

summary, an analysis mindful of protecting the CPA 's objectives and ensuring its actual continuity commands that conversion charges be excluded from credit charges .

They must instead be considered charges invoiced for the use, at the consumer's choice, of a service that is ancillary to the Visa card and unconnected to the actual issuance of credit in Canadian dollars that is available under the contract extending variable credit . [ 61 ] These charges are payable by the consumer and represent the cost of using a specific service offered by the Visa system, that is, payment in a currency other than the one in which the credit was granted.

They are, consequently, included in the net capital for the purposes of the CPA , like any service acquired from a third party and paid with a credit card. In fact, Marcotte's agreement expressly provides that such charges are directly added to the Visa Desjardins account. [ 62 ] It follows that the appeal should be allowed and the incidental appeal dismissed. IV. Supplementary comments [ 63 ] In any event, even if the Court had found that the charges in dispute were credit charges , it would have accepted, as the court did in Contat v.

General Motors of Canada Ltd. , J.E. 2009-1769, 2009 QCCA 1699 , rendered after Household Finance , which was cited by the trial judge, that there was in this case a breach of section 271(2) CPA :

271. Si l'une des règles de formation prévues par les articles 25 à 28 n'a pas été respectée, ou si un contrat ne respecte pas une exigence de forme prescrite par la présente loi ou un règlement, le consommateur peut demander la nullité du contrat. Dans le cas d'un contrat de crédit , lorsqu'une modalité de paiement ou encore le calcul ou une indication des frais de crédit ou du taux de crédit n'est pas conforme à la présente loi ou à un règlement , le consommateur peut demander, à son choix, soit la nullité du contrat, soit la suppression des frais de crédit et la restitution de la

partie des frais de crédit déjà payée. Le tribunal accueille la demande du consommateur sauf si le commerçant démontre que le consommateur n'a subi aucun préjudice du fait qu'une des règles ou des exigences susmentionnées n'a pas été respectée. [Emphasis added.] 271. If any rule provided in sections 25 to 28 governing the making of contracts is not observed or if a contract does not conform to the requirements of this Act or the regulations, the consumer may demand the nullity of the contract.

In the case of a contract of credit, if any of the terms and conditions of payment, or the computation or any indication of the credit charges or the credit rate does not conform to this Act or the regulations , the consumer may at his option demand the nullity of the contract or demand that the credit charges be cancelled and that any part of them already paid be restored.

The court shall grant the demand of the consumer unless the merchant shows that the consumer suffered no prejudice from the fact that one of the above mentioned rules or requirements was not respected. [ 64 ] Since Marcotte claims for himself and for the members of his group the reimbursement of the conversion charges described above because the indication of the credit rate or credit charges does not conform to the CPA , Desjardins argues that it would be necessary to consider whether the third paragraph applies. [ 65 ] The trial judge acknowledged that the conversion rate invoiced by Desjardins, including the conversion charge, was [translation] "competitive on the market, even generally favourable to consumers" and that nobody characterized it as being [translation] "abusive, unreasonable or disproportionate" (judgment at para. 124). [10] Furthermore, the service of paying in a foreign currency had been rendered to the complete satisfaction of Marcotte, who found it quite useful (paras. 5, 733 and 734 of the judgment).

In short, Marcotte suffered no prejudice from the fact that Desjardins, in good faith, indicated charges and computed rates in a manner that did not conform to the CPA (but which was nevertheless clearly disclosed within the meaning of

section 12 of that statute). [ 66 ] As for

section 272 CPA , I find that it does not apply in this case. That is not to say that a condemnation under

section 272 would not be possible if the indication or computation was not performed in keeping with the CPA as part of a practice that the merchant knew or should have known was in breach of the statute. Sections 271 and 272 are not necessarily mutually exclusive, as pointed out by Beauregard J., dissenting, in Household Finance , supra.

In this case, however, the fact remains that the alleged breaches were covered by section 271(2), and the evidence did not justify a finding that Desjardins wilfully misled its customers or breached the CPA , that it showed contempt for this statute, or that it displayed conduct that would otherwise be unacceptable from a financial institution. [ 67 ] In these circumstances, even if they were credit charges , it would have been appropriate to dismiss the action in reimbursement and allow the appeal. V.

Constitutional ground [ 68 ] As for the constitutional ground raised by Desjardins – that is, exclusive federal jurisdiction pursuant to section 91(18) Constitution Act, 1867 over credit card payment terms – we need not consider it in any depth. It is enough to say that the slip signed by the cardholder at the time of payment (or its electronic equivalent for cards with PINs) is much more akin to an acknowledgement of debt [11] than to a bill of exchange that requires a drawer, drawee and payment order benefiting the merchant (

section 16 of the Bills of Exchange Act , R.S.C. (1985) c. B-4). Commentators dismiss the theory that the slip and related payment operations might be considered similar to those related to a bill of exchange (M.H. Ogilvie, Canadian Banking Law , 2d ed. (Scarborough, Ont.: Carswell, 1998) 706; Bradley Crawford, The Law of Banking and Payment in Canada , vol. 2, loose-leaf edition (Aurora, Ont.: Canada Law Book, Jan. 2010, No. 13:10.20 (2)(d)) 13-8 and 13-9. CONCLUSION

[ 69 ] For these reasons, I would allow the appeal, set aside the judgment of the Superior Court and dismiss both the class action and Mr. Marcotte's action, with costs. PIERRE J. DALPHOND, J.A