Further legal action against banks expected as judge rules takes aim at late payment fees

Further court cases against banks have been flagged after Australia’s largest class action suit, against ANZ Banking Group, found that late-payment fees charged on credit card accounts are “capable of being characterised as a penalty” and therefore were a breach of contract.

Law firm Maurice Blackburn, backed by listed litigation funder IMF, launched a $50 million class action last year against the bank on behalf of 34,000 customers, arguing that a suite of fees were penalties, and therefore unlawful.

Maurice Blackburn said then the average claim for each customer was about $1,500.

Justice Michelle Gordon yesterday in the Federal Court ruled the $35 late-penalty fee for credit cards could be characterised as a penalty, rather than a fee for service.

But in a win for ANZ, she also ruled that dishonour fees and honour fees were not penalties, and therefore not in a breach of contract. Over limit and and non-payment fees were also not found to be penalties.

Dishonour fees of up to $60 apply when cheques bounce and a credit card is overdrawn. Honour fees of $29.50 are applied when a bank clears a cheque even though there isn’t sufficient money in the account.

ANZ chief executive Australia Philip Chronican said after the ruling that the bank’s “consistent position has been that while some of our fees may have been unpopular, we believe they were lawful and we are pleased this has been vindicated in the ruling”.

“The one finding in IMF’s favour does not provide a resolution for class action participants.”

“It’s a complex case, still in the preliminary stages, and we will continue to vigorously defend the IMF action next year.”

The bank has abolished dozens of fees over the past two years, and reduced its late payment fees from $35 to $20.

ANZ and Maurice Blackburn are both expected to appeal the ruling, with Maurice Blackburn highlighting further legal action against other banks worth tens of millions of dollars.

The Australian Bankers Association declined to comment on the case this morning, saying it was not sufficiently briefed and it was reluctant to do so while the matter was before the courts.

Consumer group Choice said this morning that late payments and how they are levied is a “vexed” issue, and often labelled a “tax on the disorganised.”

Spokesman Christopher Zinn says it remains to be seen how the case will affect other businesses using late-payment fees.

“Late fees are a stick and should be used judiciously, ” Zinn says.

“My reading of it is there’s nothing wrong with a penalty fee but the issue is the quantum of the fee.”

“If it’s considered extravagant, then you could be in trouble.”

For those on the receiving end of late-payment fees they consider over-the-top, Zinn advises people to speak up.

“The more complaints, the more pushback,” he says.