Big banks face court over penalty fees

Westpac and the Bank of New Zealand will officially face legal action tomorrow over millions of dollars of allegedly unfair penalty fees.

The Fair Play on Fees group is running class-action lawsuits against all the major banks to try to recoup excessive fees charged for the likes of credit-card late payments and unarranged overdrafts.

The country’s biggest bank, ANZ, and the state-owned Kiwibank are already facing action, but the group has previously delayed its plans to take on ASB, BNZ and Westpac.

Yesterday it announced papers would be filed against BNZ and Westpac in the High Court in Auckland tomorrow.

ASB is the only major lender to be granted a reprieve, although the group said that was only due to logistical issues and it was still being targeted.

The banks have vowed to vigorously defend themselves.

The argument hinges on whether various penalty fees charged to customers are a reasonable reflection of the banks’ actual costs.

Fair Play on Fees lawyer Andrew Hooker said the action followed developments in Australia, where similar actions are under way against the banks’ parent companies.

In a test case against ANZ, the Federal Court has ruled late-pay- ment credit-card fees ‘‘exorbitant and unconscionable’’.

However, it has thrown out claims relating to other fees, with both sides appealing the decision in the High Court yesterday.

Hooker said Fair Play on Fees had held off filing documents until judgments in Australia gave a clearer picture of how the case could unfold in New Zealand.

‘‘We can now file against Westpac and BNZ with the knowledge that courts in similar cases have found penalty fees, such as credit card late payment fees, to be unlawful,’’ he said.

In Australia, the usual six-year time limit on legal action has also been waived, which Fair Play on Fees hopes to replicate here.

However, it is unable to copy a sweeping new action filed by law firm Maurice Blackburn against ANZ, Citibank and Westpac.

The new suits run in tandem with existing class actions, but open them to anybody who has ever been charged excessive fees.

The current lawsuits can only give restitution to those customers who have registered.

Hooker said the ability to run both open and closed actions in parallel was ‘‘a quirk of the Australian class action system’’.

Only the 41,600 people who have signed up can reap the rewards of any compensation. Hooker said Westpac and BNZ customers still needed to sign up if they wanted to be involved in the action.

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