Court Dismisses Lawsuit Over "Lost" Checks, Citing Deceptive Practices
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A non-bank lender, Sirius Network Services, had its lawsuit to collect NIS 322,150 in bounced checks dismissed by a court. The Rishon LeZion Magistrate's Court ruled that Sirius failed to comply with the Fair Credit Law by not disclosing loan details and interest rates. The court also found the company engaged in "blatant bad faith" by claiming checks were "lost" when they had been transferred to other entities. Sirius was ordered to pay the defendant, Mordechai Chen, NIS 35,000 in legal costs.
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- Sirius Network Services' lawsuit for NIS 322,150 in bounced checks was dismissed by a court.
- The court found Sirius engaged in "blatant bad faith" regarding the "lost" checks.
- Sirius failed to comply with the Fair Credit Law's disclosure requirements for loans.
- The defendant, Mordechai Chen, will receive NIS 35,000 in legal expenses from Sirius.
- The judge noted significant contradictions in testimonies from both Sirius and the defendant.
- The ruling does not preclude Sirius from pursuing contractual claims for the debt settlement.
A non-bank lending company, Sirius Network Services, had its lawsuit to collect 16 bounced checks totaling NIS 322,150 dismissed by the Rishon LeZion Magistrate's Court. The court also ordered Sirius to pay the defendant, Mordechai Chen, NIS 35,000 in legal expenses. The company, which provides financial services and engages in non-bank credit, failed to disclose the loan details and misrepresented the status of the checks.
Chen had provided the checks to Shachar Shitrit, a licensed financial services provider, as part of a check discounting transaction between January and November 2020. Shitrit discounted the checks with Sirius, but they all eventually bounced due to cancellations, insufficient funds, or expired dates. In April 2022, Sirius and Chen signed a debt settlement where Chen acknowledged owing NIS 300,000. Crucially, the settlement stated that Sirius was responsible for "lost" checks that were not in its possession and would return them upon full payment.
Later, Chen received a bridging loan from Sirius and another loan from Green-Ark, from which NIS 190,000 was paid as a "brokerage fee" to another company, L.N. Uriya Real Estate Entrepreneurship. Chen claimed this payment settled his debt to Sirius, while the company argued it was an unrelated brokerage commission.
Sirius then attempted to collect the checks through the Execution Office. Chen objected, alleging the transaction was an "usurious and illegal" grey market loan and that the debt settlement was signed under duress. Judge Rivka Arad noted significant contradictions in both parties' testimonies, stating neither fully disclosed the facts. However, the legal basis for dismissal was Sirius's failure to comply with the Fair Credit Law, which treats check discounting as a loan. Sirius was required to disclose loan details, interest rates, and credit costs, which it failed to do. The court found evidence that Sirius knew the checks originated from a loan transaction, despite the company's claim it only received them from Shitrit.
Furthermore, the court found Sirius's claim that the checks were "lost" to be a false representation. The company's manager, Alon Ben-Yair, admitted under cross-examination that the checks were not in their possession when the settlement was signed, having been transferred to other discounting bodies. The judge deemed this "blatant bad faith," preventing Sirius from collecting the checks. Shitrit's testimony was also found to be contradictory and unhelpful, requiring a court order for his appearance.
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