ANZ beats bank fees High Court class action

Banks have won the battle over late credit card payment fees, with the High Court dismissing a class action against ANZ.

Today’s ruling ends a six-year legal battle between ANZ and more than 43,000 of its customers. Pic: Bloomberg

Banks have won the battle over late credit card payment fees, with the High Court dismissing an appeal lodged by 43,500 members of a class action targeting ANZ.

Today’s High Court ruling marks the end of the class action suit that was first launched in 2010, disputing that banks can legally charge late payment fees on credit cards.

But the High Court today disagreed, saying the charges were not established as “penalties” and ANZ could recover losses caused by late payments.

“It may be accepted that it is difficult to measure the loss to the ANZ as a result of a late payment,” Justice Susan Kiefel said. “The relevant question in this case is whether the late payment fee is out of all proportion to the ANZ’s interest in receiving timeous payment of the minimum monthly payment.

“Applying this test, the appellants did not establish that the late payment fee was a penalty.”

While ANZ was the target of the action, the ruling has clear implications for all the major banks, as well as utility and other companies charging late fees.

“Today’s decision by Australia’s highest court brings to an end this lengthy and expensive litigation... which we have long held was without merit,” said ANZ’s Australia chief Fred Ohlsson.

Law firm Maurice Blackburn, which brought the class action on behalf of ANZ customers, said it had been a worthwhile exercise despite the loss.

“The class action sought to set an important precedent in calling for better standards when it comes to extra fees across the banking industry,” said its head of class actions Andrew Watson.

“Many of the late payment fees charged have been reduced, but we are concerned in light of today’s decision that the banks now have a license to hike those fees back up.”

Litigation funder IMF Bentham, which supported the lawsuit financially, said it would take a hit of up to $9.5 million to its full year profit as a result of the High Court decision.

IMF Bentham shares dropped as much as eight per cent on the High Court’s decision, and at 12.40pm (AEST) had recovered slightly to be down nine cents, or 5.6 per cent, at $1.53.

The High Court appeal came after the Federal Court last year countered a 2014 decision deeming the charges illegal.

The class action began in 2010 with Maurice Blackburn taking eight Australian banks, including Commonwealth Bank and ANZ to court over unfair fees.

In the class action dealing with ANZ, lawyers argued that charging $35 for late credit card payments is too high, considering the apparent cost of the fees range from a few dollars to only 50 cents.

They said customers should be refunded the difference.

The class action was Australia’s biggest, with thousands of angry customers seeking to claim back more than $50 million in excessive fees.

After the test case was first launched against ANZ Bank in the Federal Court, Judge Michelle Gordon, who has since joined the High Court, found that late payment fees could potentially be regarded as unlawful penalties.

She ruled against the plaintiff, however, on four other categories of charges, including over-limit fees on credit cards, as well as honour, dishonour and non-payment fees on deposit accounts.

Undeterred, the plaintiff appealed to the High Court, which overturned 150 years of legal history by clarifying that bank fees could be construed as penalties.

The case was then referred back to the Federal Court, where Justice Gordon ruled in favour of the plaintiff on credit-card late payment fees, while backing ANZ on the four other fee categories.

On appeal, the Full Court said Justice Gordon had the right legal principles in mind when determining whether a fee was a penalty, but wasn’t even close when it came to calculating the bank’s costs for processing a late payment fee.

The judge found that fees of up to $35 were “extravagant and unconscionable” as costs were sometimes as low as 50c.

The Full Court, on the other hand, said costs had to be examined on a forward-looking basis.

Allowance had to be made for things like provisioning and the cost of holding additional regulatory capital if the customer’s risk rating deteriorated.

The judges said in some cases ANZ’s costs could actually be higher than the fee.

A long list of considerations on whether ANZ had acted unconscionably all went in the bank’s favour.

There was no dishonesty, trickery or sharp practice, the fees were fully and not unfairly disclosed, they could be avoided, there was no victimisation or taking advantage of the plaintiffs, and there was no lack of good faith by ANZ.

Both sides have spent in the tens of millions of dollars on legal costs.

Lawyers now say it’s up to the government to stop banks gouging high fees from customers.

“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,” lawyer Andrew Watson said after today’s ruling.

With AAP