Ottawa, Dec. 16 /CNW/ - Mortgage holders fighting for fair treatment from their banks and financial institutions have scored a second victory in a $100 million class action lawsuit.

Industrial Alliance, a financial institution with operations across Canada, has agreed to fully reimburse some mortgage holders who did not get the benefit of their right to pay down their mortgage before being penalized for closing it out early.

The settlement was reached through mediation talks with Regional Senior Justice Warren Winkler, the head of the Toronto class action team.

Industrial Alliance mortgage holders were entitled to prepay 15% of their mortgage without penalty provided that payment was made on a "regular instalment date." Instalments dates could be weekly, bi-weekly or monthly.

The terms of the settlement provide for full recovery of the excess penalty charged to those who paid out their mortgage on a "regular instalment date." Those who did not pay out their mortgage on a proscribed instalment date will not participate in the compensation package, according to the terms of the settlement. In making the settlement, Industrial Alliance becomes the second financial institution to settle with its mortgage holders.

Mortgage holders who believe they qualify should visit www.bankclassaction.com to sign up for updates or contact their local Industrial Alliance office.

Earlier this year, Ottawa-based Civil Service Co-operative agreed to pay a total of $147,329 to 780 customers who found themselves in similar circumstances.

The remaining actions against most of Canada's largest chartered banks continue before the courts. For most chartered banks however, a prepayment can be made at any time or on any payment date suggesting a much broader class entitled to participate in any award or settlement which may be reached.

Meanwhile, the frustration that many Canadians have with those banks is plainly evident in the responses that have deluged a web site tied to the class action lawsuits.

The web site, www.bankclassaction.com, provides information on the class actions first launched against 11 financial institutions. The actions seek the return of more than $100 million to about 200,000 Canadians who did not receive prepayment credits on their mortgage payouts.

Since the web site's launch in June, 2004, it has received visits from more than 10,000 Canadians, 1,000 of whom have registered for updates. Eight hundred people have used the web site to send e-mails to their banks and 1,200 have sent emails to the class action legal counsel.

A TD Canada Trust client, Unjoo Burlie of Surrey, B.C., writes: "If I had been asked by the loans officer whether I wanted to choose prepayment before discharging the mortgage I would have replied without hesitation, YES! The loan officer failed to mention this option... I feel that I was treated without proper consideration."

Bank customers are clearly angered by the practice. "I am quite frankly disgusted at the way the Bank of Montreal has decided to treat their clients," says Steven Wacker of Regina, Saskatchewan. "Canadians expect that if they ask their bank for the "cost" of paying out their mortgage early, their bank will behave honourably and advise them of the lowest-cost option allowed for by the mortgage contract" said John Farah, of Farah & Associates, class counsel for the representative plaintiffs, with the assistance of the law firm of Koskie Minsky LLP. "Surely the opportunity to save $500 is a worthwhile amount when getting out of a mortgage early."

Banks, in recent advertising campaigns, have suggested that they are there to help Canadians save money, he added, "but it is clearly the opinion of these customers that the banks did not do so in these cases."

The full text of the class member quotes - and the voices of many more disgruntled bank customers - are appended to this press release and can be found at: www.bankclassaction.com/media.cfm

Lawsuits have been filed against all major banks and financial institutions in Canada, with the notable exception of the Royal Bank of Canada. The Royal Bank consistently extended to its mortgage holders the right to pay down their mortgages before being penalized to close them.

The suits contend that the other banks have consistently overcharged homeowners who paid out their mortgages. People closing a mortgage before it matures have overpaid, the lawsuits says, because most banks have neither allocated a portion of the payout to the prepayment nor informed them of their right to pay down their mortgages before being penalized on the balance owed.

The claims arise when homeowners pay out their mortgage when selling or re-financing their homes, for instance. The standard industry contract says a homeowner may do so with the payment of a penalty, usually three months' interest. The banks and other mortgage lenders, however, calculate the interest penalties on the full balance owed, even though most customers have a contractual right to pre-pay 10-20% yearly without any interest penalty.

Exercising these rights makes a substantial difference to the pocketbooks of homeowners. For example, if a homeowner owed $200,000 on a mortgage, at an interest rate of 7%, the three months' penalty charged by the financial institutions would amount to $3,500. However, if the bank credited the homeowner the 15% penalty-free prepayment, the balance owing would be reduced to $170,000 and the three months' interest penalty would be just $2,975 - a savings of $525.

Canadians who think they may have been overcharged by their financial institution are encouraged to visit www.bankclassaction.com to participate or get more information.

EXCERPTS FROM SOME OF THE 2000 EMAILS SENT TO BANKS AND CLASS COUNSEL

"I am very disappointed in TD, your greed and lack of concern for customers is Incredible. I asked my Northhill TD Branch to make the payout as cheap as possible and they never even mentioned the option of using the maximum prepayment. I suspect they were under orders from your head office to bleed the customers as much as possible. So either they were liars or incredible ignorant about the terms of their own mortgages."

-Paul Finlayson, Fort McMurray, AB

"I am quite frankly disgusted at the way the Bank of Montreal has decided to treat their clients. I have used you for virtually all my banking needs... in no small part because I felt that I could trust you. Completing most bank transactions involves numerous multi-paged forms with endless small print. I relied on your employees to indicate to me what was of, and in, my best interest. Perhaps that was foolish, but I really expected no less. After all, I have paid you well for your services over the years. I thought you might value that."

-Steven Wacker, Regina, SK

"Good customer service is about Making Things Right. Only time will tell if you will be made to understand."

-Derek Yasinski, Pense, SK

"The loans officer failed to mention the prepayment option when the mortgage was discharged. I physically met with the loans officer in order to discharge the mortgage, so there was opportunity for this option to have been presented - yet it never was... I am outraged that I was never given this option... When I spoke to the TD Canada Trust telephone representative about not being given the option to make lump sum payment at time of discharging the mortgage, he replied that it depended on the loans officer. That is, some loans officer have the time and knowledge to advise their customer of this feature before making the discharge final. However, if the loans officer fails to mention this option, then the interest penalty is charged at the full amount....

"I regard banking relationships as being extremely important. I feel that as a TD Canada Trust client, I was treated without proper consideration. My impression is that TD Canada Trust sought to maximize their interest revenue without advising me of the options."

-Unjoo Burlie, Surrey, BC

"The issue is that TD Canada Trust failed to disclose to me that we had the option of making a prepayment which in turn would have reduced the penalty I had to pay. I was presented with a bill which I assumed I had to pay and acting in good faith I paid. However, the same cannot be said for TD Canada Trust when it failed to disclose to me the prepayment option that would have reduced my penalty."

-Albert Galpin, Ottawa, ON

"Should you fail to take the honourable course of action, I promise to move my bank accounts and two mortgages from your institution and not do business with you again."

-Michael Oliphant,Toronto, ON

For further information: John Farah, Farah & Associates, Tel: (613) 292-6126, Email: jfarah@farahandassociates.ca, Web site: www.bankclassaction.com