ANZ credit card late fees ruling overturned by Federal Court

A landmark ruling that credit card late payment fees charged by ANZ were illegal has been overturned on appeal in the full Federal Court.

The court said on Wednesday that it would reverse last year's ruling that late payment fees were an illegal penalty. The original ruling had threatened to cost the big banks tens of millions of dollars,

The bank's shares were placed in a trading halt on Thursday when it announced the capital raising.Credit: Louie Douvis

The decision could come as a blow to a multimillion-dollar class action running against several major banks over fees.

But the class action's principal financial backer IMF Bentham Australia said it was likely to seek leave to appeal to the High Court.

In a decision that also raised doubts about the validity of late fees charged by companies such as telecommunications providers and utilities, Justice Michelle Gordon last February ruled that ANZ's late payment fees of up to $35 were "extravagant, exorbitant and unconscionable".

Four other types of fee were ruled legitimate.

ANZ had been appealing against the judgment over credit cards.

Legal firm Maurice Blackburn, which is leading the class action against the bank, had also been appealing against key parts of the ruling that favoured ANZ, namely that honour fees, ­dishonour fees, and over-limit fees were acceptable.

On Wednesday, the court ruled that the late fee was not extravagant nor unconscionable and ANZ's appeal should be allowed. It also dismissed Maurice Blackburn's appeal.

Maurice Blackburn's national head of class actions, Andrew Watson, said he would appeal against the Federal Court's ruling in the High Court:

"Obviously we are still digesting the details of what is a very large decision but based on what we've read we think there are grounds for appeal and we will be making an application for special leave of the High Court.

"It is perhaps appropriate that Australia's largest consumer class action will ultimately be determined by Australia's highest court and as a result of today's decision that's where we're headed," he said.

"Unfortunately, the decision today runs the risk of turning the doctrine of penalties and the statutory provisions on which in we rely into empty vessels devoid of any practical or meaningful content ,and significantly reducing the protection for all consumers in Australia."

The chief executive of ANZ Bank's Australian operations, Mark Whelan, said the bank hoped Wednesday's ruling put an end to the long-running litigation, which has been funded by IMF Bentham.

"Our long standing position has been these fees were lawful and we're pleased this has been vindicated by the Full Federal Court," Mr Whelan said.

"We were particularly pleased the Court found there was no dishonesty on ANZ's part and these avoidable fees were fairly and fully disclosed and there was no lack of good faith by ANZ.

The case against ANZ is viewed as a key test case for a broader class action against several of the country's biggest banks including Commonwealth Bank, Westpac and National Australia Bank. With about 180,000 customers having signed up, it is being billed as the biggest in Australian history.

Last year NAB signalled it was open to settling with its customers over credit card late fees – thought to number about 30,000.