Class Action 10099-05-20: Mizrahi Tefahot exchange fee | Court Rulings against Bank Mizrahi Tefahot

Background and facts: the currency exchange fee in direct channels at Mizrahi Tefahot

On December 25, 2024, Judge Iris Rabinovich Brun of the Central District Court (Lod) approved a settlement in Class Action 10099-05-20, Yuval Lapiner v. Mizrahi Tefahot Bank. The motion for certification was filed in May 2020.

A currency exchange fee is charged when converting currency, for example when buying foreign currency for shekels. The bank's fee schedule, and its benefits appendix, set a reduced fee for transactions online or through the staffed telephone call center. According to the applicant, the bank charged a full currency exchange fee on foreign currency purchases made through these channels, without giving the benefit.

The applicant estimated his personal damage at NIS 17.99, and the claim as a whole at an amount exceeding NIS 3 million. He attributed to the bank a breach of sections 9I(c) and 9J of the Banking (Customer Service) Law, breach of contract, breach of the duty of good faith and trust, and unjust enrichment.

The parties' arguments

The bank's arguments

The bank argued that the transactions the applicant complained about are not direct channel transactions. In its words, these are foreign currency conversions in the course of a foreign currency transfer or a purchase of foreign securities, carried out by a clerk. The bank noted that since September 5, 2018 it has been possible to give a foreign currency transfer instruction online, but argued that the instruction is passed on for manual handling by a clerk.

Regarding the staffed call center, the bank argued that it gave the discount. In its words, the applicant does not distinguish between a call to the staffed call center and a call with a clerk at the branch, which does not entitle the customer to the discount. The bank also argued that the discount at the call center was given voluntarily, and that the fee rules do not require it.

The applicant's arguments

The applicant replied that it makes no difference that a clerk handles the instruction after it was sent. In his words, the question is through which channel the customer carried out the transaction. He referred to rule 2(c) of the Fees Rules, which since November 1, 2017 requires a benefit to be given for a service in a direct channel, and argued that the provisions of the Banking Law prevail over any contrary agreement.

What the court decided: main terms of the settlement

After a pretrial hearing on November 1, 2021, the parties went to mediation with Adv. Yigal Borochovsky and Adv. Ram Waltzer. The motion to approve the settlement was filed on September 3, 2023. According to the judgment, the settlement was made without admission of the claims.

The refund: 70% of the difference, at least NIS 2.7 million

The bank will refund eligible customers 70% of the difference between the fee charged and the fee at the price of a transaction online or through the staffed call center, as the case may be. The amount includes interest and linkage differentials. According to the bank's review, the refund to one group was estimated at about NIS 700,000 and to the second group at about NIS 2,000,000. The final refund amount will not be less than NIS 2,700,000. If it turns out to be lower, the difference will be paid to the fund for managing and distributing monies.

Arrangement for the future and the State's position

The bank undertook to charge, for a currency exchange fee in the course of another service online or through a staffed call center, the price of a direct channel transaction. It also undertook to amend the fee schedules, and to clarify that the call center discount is given only for a call to the staffed call center and not to the branch where the account is held.

On February 22, 2024, the State filed a position, which included a comment by the professional bodies at the Bank of Israel and the Ministry of Justice. According to the comment, a service through a staffed telephone call center is defined in the Fees Rules as a service through a clerk and not as a service in a direct channel. It was therefore argued that it is difficult to approve the arrangement for the future. At the hearing on June 3, 2024, the parties agreed that the amendment of the fee schedule would be made subject to the provisions of the law, and it was clarified that large businesses are also entitled to compensation.

In August 2024, an amendment to the Fees Rules was published, which according to the applicant allows benefits for telephone service, and it came into force six months after its publication. The bank announced that in the meantime it had cancelled the discount for other transactions at the staffed call center, and that it had not yet decided whether it would continue to give a discount on the currency exchange fee at the call center.

Reasons for approval

The court found that the claim discloses a prima facie cause of action at the level required for approving a settlement. No objections were filed and no requests to opt out of the class were filed. Taking into account the risks and prospects, it was held that the settlement is an efficient and fair way of resolving the dispute. The court decided not to appoint an examiner, in view of the data, the mediation process, the nature of the refund and the costs.

Award and legal fees

An award to the applicant of 4.5% and legal fees to his counsel of 18% of the total settlement amount, plus VAT, were approved. The bank pays them in addition to the refund. Half will be paid within 14 days on the basis of an amount of NIS 2,700,000, and the balance after the summary report.

Quotes from the decision

"The parties reached an agreement and a resolution of the dispute by way of a settlement, without this constituting an admission of any of the parties' claims."

Paragraph 8, page 4 of the judgment (translated from Hebrew).

"I find that this settlement can achieve to a reasonable degree the purposes of the law, among them realizing the right of access to the court in proper claims, enforcing the law, deterring breaches of the law"

Paragraph 38, page 12 of the judgment (translated from Hebrew).

Who is eligible and what to do

The class includes past or present customers who, during the relevant period, were charged a currency exchange fee higher than set in the bank's fee schedules, for the reasons in the motion for certification. Under the settlement agreement, the period begins on May 5, 2013. Eligible are those charged a price higher than the direct channel price for a conversion in the course of another transaction online or through the call center. Also eligible are those charged a price higher than the staffed call center price for a transaction by telephone.

Open account: the refund will be paid directly into the account within 90 days of the determining date, without a fee for the credit.
Closed account and a refund of more than NIS 40: a cheque to the address registered at the bank within 60 days, with a notice of eligibility.
Closed account and a refund of less than NIS 40: the amount will be transferred to the fund and will not be paid personally.
Cheques not cashed and amounts not paid will be transferred to the fund. The bank will file a detailed report 260 days after the determining date.

The determining date is the date on which the judgment approving the settlement became final. The court ordered a notice to be published in two daily newspapers and on the bank's website.

What it means for Mizrahi Tefahot customers

The settlement is not an admission by the bank. It shows that a benefit the bank publishes in its fee schedule for direct channels may be the subject of a claim, when it is alleged that it was not actually given. A customer who converted foreign currency online or by telephone can compare the fee charged with the direct channel price in the fee schedule.

Further disputes over foreign currency fees and other fees are collected on the class actions page and in the rulings database.

Sources

Notice of settlement agreement and judgment, Class Action 10099-05-20 Lapiner v. Mizrahi Tefahot Bank, December 25, 2024 (PDF)

Frequently asked questions about court rulings against Mizrahi Tefahot Bank

What was Yuval Lapiner's claim against Mizrahi Tefahot over the currency exchange fee about?

The applicant argued that the bank charged a full currency exchange fee on foreign currency purchases online or through the staffed telephone call center, without giving the discount in the fee schedule for these channels. The bank argued that the transactions were in fact carried out by a clerk and do not entitle the customer to the discount.

How much will Mizrahi Tefahot refund under the settlement in Class Action 10099-05-20?

The bank will refund 70% of the difference between the fee charged and the direct channel or staffed call center price, and in any case not less than NIS 2,700,000. If the refund is lower than that, the difference will be paid to the fund.

How will customers receive the currency exchange fee refund?

Customers with an open account will be credited directly within 90 days of the determining date. Customers whose account is closed and who are owed more than NIS 40 will receive a cheque. Amounts under NIS 40 in closed accounts will be transferred to the fund.

Are large businesses included in the settlement?

Yes. According to the judgment, at the hearing on June 3, 2024 it was clarified that large businesses are included among those entitled to compensation.

How to cite

Class Action 10099-05-20 (Yuval Lapiner v. Mizrahi Tefahot Bank), Central District Court (Lod), 25.12.2024. Source: Net HaMishpat (Israeli courts database), case Class Action 10099-05-20 (Yuval Lapiner v. Mizrahi Tefahot Bank).

Class Action 10099-05-20 Lapiner: Mizrahi Tefahot will refund at least NIS 2.7 million in currency exchange fees