ANZ late payment credit card fees illegal: court - SMH
Big banks could be forced to refund more than $55 million to their customers, after the Federal Court found ANZ Bank had charged "extravagant, exorbitant and unconscionable" late payment fees on credit cards.
The ruling also raises doubts about fees that telecommunications and utilities companies charge customers who fail to pay their accounts on time.
In a decision that could affect tens of thousands of customers, the Federal Court on Wednesday found late payment fees charged by the bank were illegal, while four other types of fee were legitimate.
Some 43,500 customers have challenged ANZ in a multimillion-dollar class action alleging certain fees were illegal because they exceeded the cost to the banks of customers overdrawing their accounts or missing repayments.Justice Michelle Gordon ruled that most of the fees charged by the bank were legitimate, but its late payment fee of up to $35 was ''extravagant, exorbitant and unconscionable.''
The case against ANZ has broader ramifications because is being used as a template for a 185,000-strong class action against major lenders including the Commonwealth Bank, Westpac, NAB and Citi, which proponents say could be worth more than $220 million. It is being billed as the largest class action in Australian history.
The finding paves the way for customers to take action against any company with a late-payment regime, including telecommunications and energy providers.
It also throws out ANZ's six-year statute of limitations, meaning anyone who has ever been charged a late fee by ANZ can potentially now claim those fees back.
''Wherever there are other late payment regimes, they will need to be examined carefully,'' Maurice Blackburn's national head of class actions Andrew Watson said.
Mr Watson told customers to wait for the firm to assess the full implications of the decision before coming forward with new claims.
''There will be a significant amount of interest by those consumers in getting that money, which was unlawfully taken from them, back,'' he said.
''For years and years and years, their banks have been charging them these exorbitant fees.''
''We are now considering the ramifications of the decision.''
Gerard Brody, chief executive of the Consumer Action Law Centre, said companies charging late fees should examine whether they were at risk of breaking the law.
''Telcos especially should examine this judgment and determine whether their fees are similarly excessive, extravagant and unconscionable,'' he said.
Choice chief executive Alan Kirkland said energy companies should also question whether their fees are legal.
''Any business that relies on late payment fees as part of its business model needs to be very worried about this judgment,'' he said.
Both Telstra and Optus charge a flat late-payment fee of $15 on any bill worth $70. AGL and Origin Energy charge a late-payment fee of $14 and $12 respectively.
Telstra said on Wednesday that its late payment fee was ''cost recovery for Telstra as we incur large administration costs when our customers do not pay on time.''
''For example we send reminder notices, text messages and our call centre staff telephone our customers.''
A Victory For Bank Customers
TANYA EMMETT is a planning and commercial
property lawyer with RMB Lawyers.
In this week's law column so looks at a Court victory for
consumers against one of Australia's biggest banks.
ANZ Bank customers have won a major victory against the bank in their attempt to recover million of dollars in unjust fees.
In a Federal Court ruling handed down earlier this year, the ANZ Bank was slammed for charging its customers fees for late payment on credit cards, which were considered by the Court to be "extravagant exorbitant and unconscionable". The class action involving 43,500 ANZ customers sought to prove the bank's late fees were in fact unfair penalties.
The decision has been hailed as a landmark case.
The Court heard that the bank has been charging its credit card customers up to $35 for late payments, when the typical cost to the bank of handling late payments is anywhere between 50 cents and $5.50.
Four other of the bank's fees (including honour, dishonor, non-payment and over limit fees) were also challenged, but the Court held that those charges were legitimate and only took issue with the late payment charge. Justice Michelle Gordon ruled that the bank's late payment fees were illegal and that the fee constituted a penalty far beyond the actual cost recovery levels.
The Court ruling has left ANZ facing the need to pay affected customers millions of dollars in refunds and reductions in fees paid. The Court held that a time limit for fees charged did not apply, so that there is no telling how far back refunds can be claimed for unlawful credit card late payment charges.
The controversial decision raises doubts about the validity of fees charged by other banks and telecommunication and utility providers. It is likely that any business charging late fees will now come under the spotlight.
ANZ has indicated that it will take some time to realise the cost of the Court's decision and that it intends to appeal the Federal Court's decision. The Bank's actions following the decision will no doubt be closely watched by the other leading banks.
Consumers are urged to ask for refunds or reductions in fees charged if they are being charged what they consider to be unreasonably high late fees.
At the very least, consumers should be contacting relevant companies and asking that they explain how the fee is made up and how it relates to the actual costs it has incurred as a result of the late payment.
If an unsatisfactory response is given, the complaint should be referred to an ombudsman.