AUSTRALIAN banks could face a series of costly class actions running into the billions after the Federal Court yesterday ruled that late fees on credit cards may be unenforceable. Lawyers Maurice Blackburn launched a $50 million class action on behalf of 34,000 ANZ customers, arguing that certain fees charged by the bank constituted a penalty and were therefore unenforceable.
Having examined five fee types typically used by banks, judge Michelle Gordon ruled yesterday that credit card late fees would be the subject of a separate hearing in the new year.
Andrew Watson of Maurice Blackburn yesterday declared the judgment "a significant victory", saying credit card late payment fees constituted the bulk "of the fees disputed" in the class action.
But ANZ Australia chief executive officer Philip Chronican described the ruling as "a significant judgment in the Federal Court that we see as largely in ANZ's favour" - arguing the court had struck out action on four other types of fees.
Both parties are expected to appeal aspects of the ruling and ultimately many believe it will end up in the High Court.
The case against ANZ is the opening salvo in a series of actions to be launched by litigation funder IMF Australia against 11 other banks, including CBA, NAB and Westpac.
IMF says as much as $5 billion in fees are void and should be returned to the 250,000 bank customers it says it represents. The company is funding the litigation on a "no win, no fee" basis. It is seeking to cover costs and receive a 25 per cent share of any compensation received.
As many as 100,000 of IMF's clients are believed to hold credit card accounts.
Julian Saliba, a registered builder and one of three lead applicants in the class action, is the sole trader of a business that employs his son. He says he paid ANZ a total of $7406 in fees during his time with them.
"I don't mind if I do get pinged, but the fees should reflect the service. And if the service is a computer that is just a formula that automatically deducts money from your account it should reflect that."
Mr Saliba's criticism goes to the heart of Maurice Blackburn's argument that ANZ not only charged penalties for services that the customer did not explicitly consent to receive, but that the charges themselves were excessive and unconscionable.
Australian banks have reduced or abolished the majority of fees that are the subject of proceedings, following growing public awareness in 2009.
NAB was one of the first to address the issue as it sought to steal market share from its rivals. ANZ was the last of the major banks to follow suit.
Asked if the class action had changed the behaviour of the banks, Mr Saliba said he was upbeat but realistic.
"I have found that rather than getting charged for each individual infringement now I'm getting charged once . . . but I've changed banks from National to Westpac to ANZ over the years and I've found they are all the same."
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