Banking revolution begins with landmark Federal Court ruling

5 February 2014

The Federal Court has today handed down a ruling that will change the banking landscape in Australia after it was determined that late payment fees charged by the ANZ Bank were penalties, and thousands of customers should receive compensation for amounts that had been unfairly charged.

The judgment by Justice Michelle Gordon sets the scene for the seven other major Australian banks and lenders that have similar class actions awaiting them.

Today's ruling determined that the ANZ charged customers excessive fees to administer late payments, and that those fees constituted a penalty, which the banks were not allowed to impose.

Her Honour found that ANZ's late fees of $20 and $35 exceeded the bank's true costs of dealing with late payments - ranging between 50 cents and $5.50 - by up to 7,000 per cent. This decision opens the door for the excessive amounts charged on late payment fees to be recovered from other banks.

The judgment also determined that late payment fees charged more than six years ago could be claimed and were not barred by the statute of limitations. This aspect of the judgment alone will significantly expand the banks' liability to customers.

Andrew Watson, who heads Maurice Blackburn's national class actions practice, says more than 185,000 people around Australia have been waiting nearly four years for this day to hold the banks to account and change the landscape of banking for consumers in Australia.

"This has been a long tough fight, but today the people that stood up to the banks have had an important victory," Mr Watson said.

"What has been decided by the court will mean a better deal for bank customers from now on, and potentially a better deal for consumers more broadly where these same principles apply.

"It is clearly evident from this case that the class action regime in Australia is the only genuinely effective vehicle to offer commercial redress to people that are subjected to corporate wrongdoing in this way."

Justice Michelle Gordon ruled in favour of customers regarding late payment fees, but upheld the bank's arguments on honour, dishonour and over-limit fees.

The class actions are being funded by Bentham IMF (Australia) Ltd, on a no-win no-fee basis for participants. Bentham IMF Investment Manager, James Middleweek, said despite not winning on all exception fees, the judgment is still a significant victory for customers.

"This is a great win for consumers in their case against unfair fees charged by banks. ANZ's justification for exorbitant late payment fees - up to $35 - has been dismissed. ANZ and other banks will now have to repay most of this amount wherever and whenever it has been charged to their customers in the past six years or more, plus all the interest each customer has missed out on," Mr Middleweek said.

"We note the Court did not find in our clients' favour in the matter of other exception fees - this is disappointing but we will review this part of the judgment carefully and consider our options."

History of the bank fees class actions

  • 5 February 2014: Justice Gordon in the Federal Court hands down judgment finding that late payment fees on credit cards are penalties and should be repaid, with no retrospective time limitation on claims. Justice Gordon finds for the ANZ on the other fees
  • 22 September 2010: First bank fees class action filed against ANZ
  • 5 December 2011: Justice Gordon in the Federal Court finds that late payment fees are capable of being penalties, but finds for ANZ on other fees
  • 16 December 2011: Class actions filed against Commonwealth, Westpac, NAB and Citibank
  • 22 December 2011: Maurice Blackburn appeals adverse findings in Justice Gordon's December judgment
  • 1 February 2012: Class action filed against Westpac subsidiaries St George and BankSA
  • 18 April 2012: Class action filed against Bankwest
  • 11 May 2012: High Court grants leave to appeal Justice Gordon's judgment of 5 December 2011
  • 14 August 2012: High Court hears appeal from Justice Gordon's judgment of 5 December 2011
  • 6 September 2012: High Court rules that bank fees can be considered penalties

Estimated claim size

Bank

Group Members

Range of fees charged

 
 

ANZ

43,500

$25 - $45

 

BankSA

1,500

$30 - $45

 

Bankwest

7,200

$25 - $50

 

Citibank *

12,900

$10 - $40

 

Commonwealth

48,000

$20 - $35

 

NAB

30,700

$20 - $60

 

St George

10,000

$30 - $45

 

Westpac

31,500

$25 - $50

 

TOTAL

185,300

   

* Citibank includes 1,900 BOQ and Suncorp credit card customers for whom it is the actual credit provider

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