Australia’s Biggest-Ever Class Action Begins – 38,000 Against Bank Fees and Penalties
Posted by Stephen Cook
Stephen: Australia’s has THE most profitable banks in the world.
Today 38,000 customers of the ANZ Bank, representing a whopping 170,000 total customers, launched Australia’s biggest ever Class Action as they took the bank to the Australian High Court over the fees, charges and penalties – such a late payment fees, overdrawn accounts fees etc – it has been imposing customers. All of which the customers and their lawyers – who are being funded by Australian internet service provider iinet – say are illegal.
This is one to watch. The repercussions will spread around the world.
While there are several newspaper stories on this – one of which I have run at the very bottom, this radio report is the most comprehensive. The transcript is below. You’ll need to click on the link provided below to listen as unfortunately the link is not able to be embedded here on the site.
Bank Fees Questioned in High Court
By Will Ockenden, ABC’s PM with Mark Colvin, ABC Radio Australia – August 14, 2012
Listen to the story here: http://www.abc.net.au/news/2012-08-14/bank-fees-questioned-in-high-court/4198392?section=business
Australia’s biggest class action has reached the High Court. It’s a case about what is and is not an excessive bank fee. The suit against the ANZ Bank is a test case, which could see more than $220 million returned to customers.
Host Mark Colvin: Australia’s biggest class action reached the High Court today: a suit against the ANZ Bank over fees.
The battle is over what’s fair to charge customers for missing a credit card payment or not having quite enough money in their account.
Lawyers for the ANZ customers in the class action argue that many of the fees banks charge are unfair.
They want the fees refunded. The banks say the fees are defensible.
Will Ockenden reports.
WILL OCKENDEN: Everybody grumbles about paying bank fees but now tens of thousands of people are doing something about it.
ANDREW WATSON: It’s going to be a very significant case for both banking consumers across the country and for consumers generally.
WILL OCKENDEN: That’s Andrew Watson from the law firm, Maurice Blackburn.
He’s heading up a case on behalf of 170,000 bank customers (represented by the 38,000 involved in the class action) against all of the nation’s major banks
Mr Watson argues fees on late credit card payments, bounced cheques, or overdrawn accounts are unfair.
ANDREW WATSON: The distinction really boils down to: are they a fee for a service – we say they’re not – or are they a penalty, that is, something that’s designed in effect to punish the customer. And we say they are penalties and that they’re out of all proportion to the cost to the bank.
WILL OCKENDEN: The High Court appeal against the ANZ Bank is a test case.
It’s an attempt to add to a Federal Court decision on the types of fees which can be included in the class action.
If the fee paying customers win, lawyers hope all banks will have to pay back $220 million.
ANDREW WATSON: We want customers to receive back the money that they paid in these fees over and above what it cost the bank to actually process these transactions.
WILL OCKENDEN: The Reserve Bank surveys banks fees every year.
Over the last few years, the income banks earn from households in fees has been falling.
Several years ago, about $1.3 billion in the types of fees being argued about in the High Court was collected by the banks, it’s now a third of that.
Nevertheless, Andrew Watson from Maurice Blackburn says the fees are still too high.
ANDREW WATSON: Many of the banks have cut their fees. We think that speaks volumes frankly.
We are arguing that, as their conduct would seem to indicate, that their fees were previously just simply extravagant.
WILL OCKENDEN: Professor of economics at RMIT University, Professor Sinclair Davidson, disagrees.
SINCLAIR DAVIDSON: This is a point about contracts and when people enter into a relationship with a bank they sign a contract and they agree to fees and charges up front.
And so if they are late in meeting their payments, they’re breaking their contract, they then pay the penalty that they’ve agreed to in advance.
I really don’t think that it’s that much of a problem that banks charge fees for breaching contracts.
WILL OCKENDEN: Sinclair Davidson says competition between the banks is what will bring fees down.
SINCLAIR DAVIDSON: They will charge what they can think they can get away with but if there’s push back from customers they will lower their prices. That more-or-less happens all the time. That’s what we’re seeing here and the competitive process will actually keep so-called excessive charges in check.
WILL OCKENDEN: The case is being financed by the litigation powerhouse, IMF Australia.
The company is paying for the lawyers, and will cover costs if the case is lost.
But it also charges fees – about 25 per cent of any winnings.
IMF’s executive director, John Walker.
JOHN WALKER: We’re paying for the costs of the process up to the High Court and back and the substance procedure.
We’re covering any adverse cost orders in the events that we lose and in return for that service we’re charging around 25 per cent of any money that is finally recovered.
WILL OCKENDEN: The Australian Bankers Association, which represents the banks, says the fees are defensible.
The ANZ says while some fees may be unpopular, it believes they’re lawful.
ANZ In the Dock in Largest Class Action Case
By Chris Zappone, The Sydney Morning Herald – August 14, 2012
The High Court is about to begin hearing Australia’s largest class action case with 38,000 customers taking on the ANZ bank over its fees.
Lawyers for the customers are expected to tell the court today that penalty fees charged by the bank are out of proportion with the actual cost.
The action covers various fees, including those for overdrafts, overdrawn accounts, dishonour fees and over-the-limit credit card accounts.
Penalties or fees?
The court will be asked to determine whether the charges are penalties or fees for a service.
“We’re going to be arguing that a whole range of exception fees constitute unfair penalties,” said Maurice Blackburn lawyer Andrew Watson. “What it costs the banks to process honour fees, dishonour fees, overlimit fees is a fraction of what they charge customers, therefore a penalty under the law, illegal, and something that should be paid back.”
At stake are more than $220 million in overcharges allegedly owed to 170,000 customers of eight banks.
The High Court agreed to hear the class action by customers of ANZ bank in May, following the May 2010 class action brought against by litigation funders IMF against eight of the largest banks in the country including ANZ Bank, Commonwealth Bank, National Australia Bank, Citigroup and Westpac.
The class action, launched in 2010, aimed to win back part of an estimated $5 billion in alleged penalty fees and late fees charged by banks to customers over a six year period.
Lawyers for the plaintiffs expect a decision from today’s case to be announced within six to eight weeks.
12th century principles
“This is a hard-fought contest, and a complex argument dealing with principles of English law stretching as far back as the 12th century,” Mr Watson said. “We say the law should focus on the reality of the fees charged rather than allowing the banks to hide behind complex wording to avoid the doctrine of penalties,” he said.
The 38,000 ANZ customers are seeking about $50 million in fees, forming part of the larger class action against seven other banks also including Westpac-owned BankSA, CBA-owned Bank West, and Westpac-owned St George Bank.
James Middleweek of Financial Redress, the specialist arm of litigation funder IMF, pointed to the banks’ behaviour since the case began as evidence about the underlying costs faced by the banks.
‘‘One bank has now reduced most of these charges to zero,’’ he said to reporters in Canberra. ‘‘What does that tell you about what they charged in the past?
“One bank chief executive has said that these charges were ‘completely inappropriate’. What does that tell you about the fairness of what the banks have been doing to their customers?”
According to Maurice Blackburn, Australian households paid $652 million in exception fees in the year to June 2010, down from $1.3 billion in in the year to June 2009.
The Australian Bankers’ Association defended the fees at the centre of the case.
“This matter is now before the High Court which will decide the merit of the appeal,’’ said ABA chief executive Steven Münchenberg. ‘‘The banking industry believes exception fees are defensible.”