A Montreal law firm has filed a class-action lawsuit against Canada’s major financial institutions over what the suit describes as “abusive” mortgage prepayment charges.

The class action, which will need to be authorized by a judge, argues the country’s major banks charge unreasonable prepayment fees when Quebec homeowners pay off their mortgage before the end of the term.

The suit claims banks include clauses in loan agreements that require people who pay off their mortgages early to pay one of two possible penalties, depending on which is highest: three months’ interest calculated on the prepayment amount, or what banks call the “interest-rate differential.”

The firm behind the class action, LPC Avocat Inc., contends the latter is virtually impossible to calculate and is always the highest.

“Unless you’re an actuary, and even then, we believe this is incomprehensible to a reasonable consumer,” said lawyer Joey Zukran on Thursday.

The suit will aim to have the banks reimburse class members and to have the clause nullified for future loan agreements. It will also seek $100 million in punitive damages.

The firm, Zukran said, began working on the suit after being approached by two clients.

Both clients described the calculations behind the penalties they paid as incomprehensible. The first, who decided to sell her property after making two years of payments, had to pay an “IRD” charge of $12,648 to the Toronto-Dominion Bank, instead of the prepayment penalty calculated on three months of interest, which would have been $2,247.

A second client, dealing with CIBC, was ordered to pay $29,340 instead of the three-month interest penalty of $5,788.

“The difference is objectively abusive, excessive and disproportionate,” the class-action application states.

As for the $100 million in punitive damages being sought, the motion describes the banks’ conduct as “lax, careless, passive and ignorant with respect to consumers’ rights.”

“The reality is that (the banks) have likely generated billions of dollars in profits over the years by charging prepayment charges in excess of three months of interest,” the application says.

Zukran believes there could be “tens of thousands” of Quebecers eligible to participate in the class action. He’s hopeful a judge will hear the motion to have the suit authorized within the next year.

Eligible members will need to have paid a mortgage prepayment charge of more than three months’ interest in Quebec since May 31, 2015.

For more information on the class-action lawsuit, you can visit www.lpclex.com.