Class Action 8929-08-11 Hagma: Mizrahi Tefahot will refund legal expenses charged without court approval

Background and facts: legal expenses charged in collection proceedings

The details here are based on the case law review of the Tel Aviv University Faculty of Law for September 2018. The full text of the judgment was not found openly online. According to the review, the Central District Court (Lod), per Judge Esther Stemmer, approved on September 17, 2018 a settlement in a motion to certify a class action. The applicant was Yosef Hagma, and the respondent was Mizrahi Tefahot Bank.

According to the motion for certification, the bank charged the accounts of customers against whom collection proceedings were opened with legal expenses that were not approved by a judicial body. It was alleged that this is contrary to the directives of the Supervisor of Banks (Proper Conduct of Banking Business 409). It was also alleged that on expenses that were approved, the bank charged bank interest, and sometimes default interest, although under the law they bear only linkage differentials and interest.

What the court decided: compensation by sampling

The parties did not set an amount of compensation in advance. They agreed on a mechanism by which the compensation will be set. Because of the high cost of an individual examination of each account, a statistical examination will be carried out through checks and samples. The sample will determine the average amount charged to the accounts of the debtor customers, and this amount will be refunded in full to each account holder.

According to the review, separate samples were set by periods. Regarding the early period, between May 14, 1996 and August 3, 2004, the bank argued limitation. The applicant argued that because of an earlier class motion that was rejected (the Luk case), claims from that period had not become time-barred. The court rejected the applicant's position and held that section 26(b) of the Class Actions Law extends the limitation period only for an individual claim of a class member.

The Attorney General objected to the settlement, among other reasons because the amount of compensation is not known. The court held that there is nothing wrong with the mechanism, since the bank will pay the class members the average amount found. It was also held that if the examination finds no damage, it is appropriate that no relief be given. The judge stressed, according to the review, that the bank agreed to a full refund of the amounts in dispute, although it disputes the existence of the causes of action. Agreeing to a settlement is not an admission of the claims.

Who is eligible and what to do

According to the review, those eligible are the bank's customers against whom collection proceedings were opened and whose account was charged with such expenses, in the periods for which the sample will be taken. The average amount is to be refunded to each account holder. The review does not detail the payment dates or the method of transfer.

What it means for Mizrahi Tefahot customers

The settlement concerns customers against whom the bank took collection action. A customer in such a situation can ask for a breakdown of the legal expenses charged to his account, and check whether a judicial body approved them. More information appears on the page Mizrahi Tefahot collection proceedings and in the class actions overview.

Sources

• Tel Aviv University, Faculty of Law: case law tracker, September 2018

Frequently asked questions about court rulings against Mizrahi Tefahot Bank

The source link (Tel Aviv University case law review, September 2018) has been removed from the web; the full text was not found openly online

How to cite

Class Action 8929-08-11 (Yosef Hagma v. Mizrahi Tefahot Bank), Central District Court (Lod), 17.09.2018. Source: Net HaMishpat (Israeli courts database), case Class Action 8929-08-11 (Yosef Hagma v. Mizrahi Tefahot Bank).