Lawsuit focused on bank's automatic mortgage renewals without homeowners' explicit consent
The Ontario Superior Court of Justice has approved a $1.5 million settlement in the class action lawsuit against Haventree Bank, addressing claims of automatic mortgage renewals that resulted in higher interest rates and financial losses for homeowners.
The lawsuit centred on Haventree Bank's practice of automatically renewing mortgages without the explicit consent of homeowners, often at significantly higher interest rates. The lead plaintiff refinanced her home in 2015, and when her mortgage came up for renewal in May 2019, it was automatically renewed at an interest rate of 9.99 percent, up from the previous rate of 5.37 percent. Unable to meet the higher payments, she eventually defaulted and sold her property, incurring substantial additional costs.
The class action, filed on behalf of all Canadian residents who experienced similar automatic renewals, alleged that Haventree Bank's practices breached the Interest Act and the terms of its contracts with mortgage holders. The case had been litigated for four years before reaching a settlement in October 2023 through mediation.
The approved settlement of $1.5 million will cover claims, administration expenses, class counsel fees, and an honorarium for the representative plaintiff. The settlement is expected to benefit approximately 3,340 class members. Each affected mortgage holder can receive up to $5,000, depending on the number of approved claims. Any remaining funds after distribution will be donated to a cy-près recipient, subject to court approval.
Class members will not need to prove individual losses; instead, they will share the settlement funds equally, with the average payout estimated at $3,800 per mortgage if the take-up rate reaches 20 percent. The settlement also includes releases from class members to the defendant.
The Ontario Superior Court approved class counsel fees, noting that the fees sought were significantly less than the actual costs incurred by counsel. The settlement was negotiated at arm's length with the assistance of a mediator, and no objections were raised by class members.
The court declined the request for a $15,000 honorarium for the representative plaintiff, determining that while the plaintiff had adequately represented the class and achieved a favourable outcome, no exceptional circumstances were warranting an additional payment.
Ultimately, the court concluded that the settlement was fair, reasonable, and in the best interests of the class. He emphasized the settlement's benefits for class members, many of whom would receive compensation exceeding their incurred excess fees.
