Class Action 56373-06-21 Beck and Tevel: Mizrahi Tefahot will refund fees for duplicate lawyers' warning letters

Background and facts: the lawyer's warning letter fee at Mizrahi Tefahot

On January 29, 2025, Judge Shmuel Bornstein of the Central District Court (Lod) approved a settlement in Class Action 56373-06-21. The applicants were Beck (a private applicant) and the company Tevel, Concrete Industries for Environmental Development Ltd., and the respondent was Mizrahi Tefahot Bank.

Before taking collection proceedings, the bank sends debtors and guarantors lawyers' warning letters, and charges a fee for this. According to the applicants, the bank overcharged the fee in two situations. The first: two separate letters with identical content are sent to different recipients, for example to joint account holders, and a fee is charged for each letter. The second: a warning letter fee is charged for a letter to a guarantor, although in their view this is not a warning letter but a notice for which a different fee should be charged.

The parties' arguments and the position of the Supervisor of Banks

The bank argued that the fees were charged lawfully. In its words, it has a legal duty to send warning letters before legal proceedings, and preparing each letter requires resources, checks and inquiries. The bank also argued that the letters to guarantors are warning letters, and that their wording differs according to the guarantee documents. It further argued that the claim is not suitable to be heard as a class action, because an individual examination would be needed for each class member.

The court asked for the position of the Supervisor of Banks. According to his position, the type and amount of the fee in these cases depend on the scope and nature of the actions taken before the letters were sent.

Following the court's recommendation, and after two pretrial hearings, the parties went to mediation. The settlement was reached with the help of the mediators Adv. Shoshi Neri and Prof. Alon Klement. The parties stressed that the agreements were made solely for reasons of efficiency and savings.

What the court decided: main terms of the settlement

The class and the period

The class was defined as bank customers whose account, during the relevant period, was charged for one series of letters more than one "lawyer's warning letter" fee, within 30 days. The period begins on June 24, 2014 and continues until the bank carries out its undertakings for the future.

The refund: 90% of the fee difference

The bank will pay class members 90% of the "fee difference". This is the difference between the fees charged for a series of letters and the fee that would have been charged for a single warning letter. According to the bank's affidavit, the total refund amount as of May 31, 2024 stood at NIS 2,226,900.

The amounts are final and include linkage differentials and interest. The settlement includes an addition of 2.5% if it is not approved within a year. The list of eligible customers and the amounts will be submitted to the court in a sealed envelope, and will not be shown to anyone, including the applicants.

Undertakings for the future

When the work on the warning letters to the main debtors is done with respect to one account in arrears, the bank will charge a fee only once. When the work is done broadly for each debtor, for example when there are additional debts, the bank may charge for each letter. For letters to guarantors, a fee may be charged for each letter, and the bank may add to their heading a clarification that this is a "warning". According to the motion, this arrangement is consistent with the regulator's position.

The State's position and the amendment regarding closed accounts

On November 19, 2024, the professional bodies of the State filed a notice. They commented that payment by cheque to customers whose account is closed requires effort, and suggested asking them for bank account details. They also suggested locating addresses in the Population Registry when a customer does not respond.

The parties agreed, with changes: the customer will attach an account management confirmation or a cancelled cheque, and the Population Registry will be checked only when a letter is returned to the bank. The court approved the settlement with these amendments.

Reasons for approval

The court found that the settlement is in the interest of the class, taking into account the risks and prospects of both sides. It noted the arrangement for the future, the absence of objections, and the fact that the professional bodies did not object to the settlement in principle. No examiner was appointed, because the settlement was reached in mediation and appointing an examiner would delay implementation and make it more expensive.

Award, legal fees and court fee

An award to the applicants of 3.5% and legal fees to their counsel, Adv. Amir Israeli, of 19% of the total settlement amount, plus VAT, were approved. Half will be paid within 30 days of the judgment, and the balance within 30 days of filing the final report.

The professional bodies objected to exempting the bank from the second half of the court fee. The court granted the exemption nonetheless, because the parties went to mediation immediately after the second preliminary hearing and saved judicial time. The bank was ordered to reimburse the applicants for the first half of the court fee.

Quotes from the decision

"The parties clarified and stressed that the agreements in the settlement are solely for reasons of efficiency, saving expenses and shortening the proceedings."

Paragraph 5 of the judgment (translated from Hebrew).

"The fact that the settlement also includes an arrangement for the future also supports the conclusion that this is a proper and fair settlement."

Paragraph 20 of the judgment (translated from Hebrew).

"I believe that appointing an examiner would delay the implementation of the settlement and would involve additional costs without any real benefit arising from it."

Paragraph 21 of the judgment (translated from Hebrew).

Who is eligible and what to do

Eligible are customers whose account was charged more than one warning letter fee for one series of letters within 30 days, from June 24, 2014.

• Open account: the refund will be credited to the account within three months of the date on which the judgment became final. The bank may first apply the credit to repay a debt of the customer, if there is one.
• Closed account: the bank will send a letter, and the customer will provide bank account details with an account management confirmation or a cancelled cheque.
• Amounts not paid, or cheques not cashed within four months, will be transferred after one more month to the fund for managing and distributing monies under section 27A of the Class Actions Law.

The court ordered a notice of the approval to be published in two of the four most widely circulated daily newspapers and on the bank's website.

What it means for Mizrahi Tefahot customers

The settlement is not an admission by the bank of the claims. However, it sets a rule for the future: when the warning concerns one account in arrears, one fee is charged, even if several identical letters were sent to several account holders. A customer whose account was charged several fees for the same series of letters can check this in the account statements.

General information on the collection stage appears on the page collection proceedings at Mizrahi Tefahot. Further rulings are collected in the rulings database.

Sources

• Judgment, Class Action 56373-06-21 Beck et al. v. Mizrahi Tefahot Bank, January 29, 2025 (PDF)

Frequently asked questions about court rulings against Mizrahi Tefahot Bank

How to cite

Class Action 56373-06-21 (Beck and Tevel v. Mizrahi Tefahot Bank), Central District Court (Lod), 29.01.2025. Source: Net HaMishpat (Israeli courts database), case Class Action 56373-06-21 (Beck and Tevel v. Mizrahi Tefahot Bank).