Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—D.N.J.: TD Bank dodges claims it charged undisclosed transaction fee, (Aug 8, 2016)

By Jody Coultas, J.D.

TD Bank, N.A. was not liable for allegedly misrepresenting its exchange rate for foreign currency transactions or for allegedly failing to disclose fees applied to such transactions, according to the federal district court in Camden, New Jersey. The state law consumer protection claims were dismissed with leave to amend (MXL Capital Holdings, Inc. v. TD Bank, N.A., August 5, 2016, Bumb, R.).

MZL Capital Holdings, Inc. and Thomas Raic held checking accounts with TD Bank, and engaged in international transactions involving the sending or receipt of wired currency from foreign countries. Based on an observation that the exchange rate utilized by TD Bank was different from "the objective market-based rate quoted in the Wall Street Journal," MZL and Raic conclude that "TD Bank received an improper undisclosed embedded transaction fee" that is "equivalent to a certain number of basis points it adds to what should be the appropriate exchange rate." TD Bank also allegedly did not disclose this purported fee or make its applicable rate "readily available."

Plaintiffs filed consumer protection claims under the New Jersey Consumer Fraud Act (NJCFA) and the laws of forty nine other states and the District of Columbia. TD Bank moved to dismiss.

The court previously dismissed the NJCFA claim, as pleaded in the original complaint, for failure to plead unlawful conduct on the part of TD Bank with particularity. In the amended complaint, Plaintiffs argued that TD Bank not only applied its own applicable exchange rate to foreign currency transactions, but that it also imposed an undisclosed embedded transaction fee that correlates to a certain number of basis points in addition to the applicable rate. Plaintiffs also alleged that the application of TD Bank’s "applicable exchange rate" itself, without disclosing the rate or the rate-setting methodology, was misleading and improper.

The NJCFA claim did not show with particularity that TD Bank engaged in unlawful conduct in relation to foreign exchange transactions, according to the court. Federal Rule of Civil Procedure 9(b) "applies even when the fraud relates to matters within the knowledge of the defendant and that allegations based on information and belief do not satisfy Rule 9(b) unless the complaint sets forth the facts upon which the belief is founded." Plaintiffs failed to allege facts to support the allegations, made on information and belief, that TD Bank charges an undisclosed "flat embedded transaction fee equivalent to a certain number of basis points." TD Bank was under no obligation to charge any particular rate and that it, in fact, expressly stated that it would charge its "applicable rate." The court declined to allow Plaintiffs to state a claim based on vague allegations and unsupported conclusions.

The court also dismissed Plaintiffs NJCFA claim based on TD Bank’s use of its "applicable exchange rate" because the complaint contained only conclusory allegations. Plaintiffs did not allege any facts to support their position that TD Bank’s use of its applicable exchange rate was unlawfully misleading. There was also no evidence to support the conclusion that TD Bank would apply an objective exchange rate, such as that in the Wall Street Journal, given that TD Bank was under no obligation to do so and TD Bank specifically disclosed that it would apply "our applicable exchange rate."

Plaintiffs were also unable to state consumer protection claims under other state laws for lack of standing, according to the court. The lack of evidence concerning an actual injury precluded the claims.

The case is No. 14-5772 (RMB/AMD).

Attorneys: Bruce H. Nagel and Andrew I. Pepper (Nagel Rice, LLP) for MZL Capital Holdings, Inc. and Thomas Raic. James S. Richter and Jeffrey P. Catenacci (Winston & Strawn LLP) for TD Bank, N.A.

Companies: MXL Capital Holdings, Inc.; TD Bank, N.A.

Cases: ConsumerProtection NewJerseyNews