What began in 2010 as the David and Goliath struggle has resulted in the banks victory over customers charged with late fees.
More than 185,000 Australians who were charged exorbitant fees by the banks had signed up to be part of a class action bought by Maurice Blackburn Lawyers to redeem their money plus interest. This bought the estimated claim to costs of over $240 million, making it the largest collective legal action in Australia.
The case has been closely followed by other major banks who would face similar court proceedings depending on its outcome.
On 5 February 2014 the action hit the ground running as Her Honour Justice Michelle Gordon found that the late payment fees were unlawful penalties and that customers should be reimbursed the money by which those fees exceed the true cost to the bank. In most cases the banks cost was a maximum of 50 cents to $5, while they charged late fees of up to $35 to their customers.
Unfortunately for the customers, this is where the good news ends. On appeal to the Full Court of the Federal Court Justice Gordons finding was reversed. The Federal Court took a much broader interpretation of the potential costs to the bank, including the impact of provisions for bad debts and regulatory capital.
In the matter the main question became whether the banks late fee of $35, later revised to $20 was an unfair penalty. In the end it was decided not to be.
Standing by their argument, the customers appealed the matter to the High Court of Australia.
The High Court delivered the final blow to the long running legal battle with the majority agreeing with ANZ’s claim that the maximum costs to banks of late payments should be the means of assessing whether the amount is unfair. This includes consideration of soured loans, regulatory capital and debt collection costs. Taking these factors into consideration the High Court decided that ANZ’s fees were acceptable.
The High Court also rejected the second ground of appeal that the late payments could be seen as unconscionable conduct, unjust transactions and unfair contract terms.
WHAT HAPPENS NEXT?
With ANZ and other banks fees validated, consumers and other advocates are concerned that there is now a green light to hike up the fees. Calls are now being made for the government to step in and regulate the industry. Now that the fight has gone as far as it can, it is up to law reform to make the necessary changes to ensure that customers remain protected.
About the authors:
This article has been co-authored by Haley Graydon and Steven Brown at Lynn & Brown Lawyers. Haley is a law clerk and is in her final year of study at UWA. Haley has a keen interest in is family law and estates. Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.