2011 saw one of Australia’s largest class actions commence against ANZ bank in the Federal Court of Australia.
The claim, brought by Maurice Blackburn on behalf of 34,000 customers, and funded by IMF litigations funding, alleges ANZ bank were charging a penalty in the form of the following fees:-
- Honour fees;
- Dishonour fees;
- Over-limit fees;
- Non-payment fees; and
- Late fees.
Lenders are precluded from charging penalties under the Consumer Credit Code [year] (“CCC”) and the action claims that the above fees imposed by ANZ were thereby in contravention of the CCC.
On 5 December 2011, the Federal Court considered that four of the five fees charged by the ANZ bank were legitimate but that the fifth ‘dispute’, that of the ‘late fees’ could potentially be a penalty and therefore unenforceable.
The final determination is yet to be made by the Federal Court until such time as further evidence is provided however the above comments give an indication the position of the court at this stage in the proceedings. Whilst ANZ conceded that the charge was not a genuine pre-estimate of their costs which they may incur, ANZ argued that when properly characterised, a late payment fee was a fee charged by it, as part of the operation of the account and in respect of the increased risk of default in repayment of the amounts borrowed.
In essence, a penalty cannot arise in circumstances where the effect of a transaction is for a customer to request an indulgence of their bank. Absent a breach of contract, the law simply refuses to tolerate an argument that a charge applied by a bank is unenforceable as a penalty, as the bank would reasonably incur costs as a consequence of the indulgence.
On 19 December 2011 at a press conference held by the lawyers for the class action litigants, it was revealed that the remaining big banks, CBA, NAB, Citibank and Westpac would also be targeted. It is expected that proceedings will be commenced against them for late fees charged on credit cards.
When the matter resumes in the Federal Court, following the addition of evidence, ANZ is expected to justify the size of the fee and may seek to attribute some part of the fee to credit risk.