By Clancy Yeates
The High Court has delivered the final blow to a long-running legal battle over bank fees, upholding a decision that ANZ Bank was entitled to charge late payment fees of up to $35.
On Wednesday morning, the court dismissed with costs an appeal from ANZ Bank customers. Since 2010, they have been running a class action against the bank, claiming it unfairly overcharged tens of thousands of customers for paying their credit card bills late.
Lawyers for the customers had argued the bank's late payment fee of up to $35 was an unfair penalty, as the actual cost to the bank was a fraction of this sum.
A 2014 ruling from Justice Michelle Gordon found the fees were unfair penalties because they easily exceeded the 50¢ to $5.50 cost to the bank of a customer paying late.
The customers claimed that ANZ unfairly overcharged tens of thousands of people for paying their credit card bills late.Credit: Jim Rice
However, this was overturned last year when the full bench of the Federal Court took into account a much broader range of potential costs to the bank, including the impact on provisioning for bad debts and regulatory capital.
The customers, represented by Maurice Blackburn, had appealed against this ruling, but their appeal was dismissed with costs.
A key deciding factor in the case was whether the bank's late payment fee of $35, later dropped to $20, was an "unfair penalty".
The majority of the High Court agreed with ANZ's claim that the maximum costs to banks of late payments should consider making provisions for soured loans, for holding regulatory capital, debt collection costs.
ANZ is getting closer to divesting New Zealand-based finance business UDC. Credit: Louie Douvis
The interests of the bank were affected by each of these costs, it said.
It also rejected a second appeal that alleged late payment fees amounted to unconscionable conduct, unjust transactions and unfair contract terms.
ANZ Bank's group executive for Australia, Fred Ohlsson, said the decision would draw an end to the long-running legal fight, and the bank had no plans to raise fees on the back of the ruling. He said fees were a "small part" of the bank's revenue, and about 95 per cent of customers paid their credit card bills on time.
"We, and our customers and our shareholders, bear the cost when some customers don't pay on time," he said.
The bank reviewed its fees in 2009, cutting the credit card late payment fee from $35 to $20.
However, there are fears the ruling may give the green light for banks and other companies to jack up fees, and this sparked calls for the government to step in.
Credit cards from Macquarie Bank, Woolworths and Jetstar have a $35 late payment fee, according to interest rate comparison website Canstar. Choice chief Alan Kirkland argued the ruling would allow banks to continue with a "fee frenzy."
Maurice Blackburn's national head of class actions, Andrew Watson, said the ruling meant bank customers had no way of challenging fees that did not reflect their bank's costs.
"The ball is now firmly in the Government's court if consumers are to be provided with real protection from banks using fees to gouge customers," Mr Watson said.
Chief executive of the Consumer Law Action Centre, Gerard Brody, said fees such as these were most damaging to customers on lower incomes, the government should "tip the balance" in favour of consumers.
The case has been closely watched by other banks, because seven other banks including Westpac, Commonwealth Bank and Citi were to face similar class actions if the ANZ case was successful.
Earlier this year, National Australia Bank settled with its customers who were a member of the class action for $6.6 million.
The action against ANZ was funded by litigation funder IMF Bentham and had attracted about 43,500 customers.
Aside from the impact on banks, the legal principles being debated in the case might have implications for other late payment fees, such as those charged by electricity and telecommunications companies.