Court delivers blow to bank fee class action

A New Zealand group planning a class action against banks over fees is studying a judgment handed down in Australia, which went in ANZ’s favour.

Australia’s highest court has delivered the final blow to a long-running legal battle over bank fees, upholding a decision that ANZ Banking Group was entitled to charge late payment fees of up to A$35 (NZ$37.41).

Yesterday morning the High Court dismissed with costs an appeal from ANZ Bank customers, who since 2010 have been running a class action against the bank, claiming it unfairly overcharged tens of thousands of people for paying their credit card bills late.

Lawyers for the customers had argued the bank’s late payment fee of up to A$35 was an unfair penalty, as the actual cost to the bank was a fraction of this sum.

A 2014 ruling from Justice Michelle Gordon found the fees were unfair penalties because they easily exceeded the 50c to A$5.50 cost to the bank of a customer paying late.

However, this was overturned last year when the full bench of the Federal Court took into account a much broader range of potential costs to the bank, including the impact on provisioning for bad debts and regulatory capital.

The customers, represented by law firm Maurice Blackburn, had appealed this ruling, but their appeal was dismissed with costs.

A key deciding factor in the case was whether the bank’s late payment fee of A$35, later dropped to A$20, was an ‘‘unfair penalty.’’

The majority of the Australian High Court agreed with ANZ’s claim that the maximum costs to banks of late payments should consider making provisions for soured loans, for holding regulatory capital and debt collection costs. The interests of the bank were affected by each of these costs, it said.

It also rejected a second appeal that alleged late payment fees amounted to unconscionable conduct, unjust transactions, and unfair contract terms.

The case has been closely watched by other banks, because seven other banks including Westpac, Commonwealth Bank and Citi were to face similar class actions if the ANZ case was successful.

The action against ANZ was funded by IMF Bentham and had attracted about 43,500 customers. Aside from the impact on banks, the legal principles being debated may have implications for other late payment fees such as those charged by electricity or telecoms companies.

In New Zealand, lawyer Andrew Hooker has been the driving force behind Fair Play on Fees, a campaign to take a class action against the big four banks over fees it considered unfairly high.

It cited examples including dishonour fees, credit card over-limit fees and credit card late payment fees. The New Zealand proceedings were on hold pending the outcome of the Australian case.

Hooker said he had not yet had time to digest the implications of the Australian decision. The New Zealand campaign would need to get advice on what it meant for its own case, he said. – with Sydney Morning Herald