High Court begins hearing ANZ class action
Updated
Australia's biggest class action reached the High Court today, a suit against the ANZ Bank over fees.
The battle is over what is 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 and want the fees refunded.
The banks say the fees are defensible and the key question in the case is whether the charges are penalties or fees for a service.
The Australian Bankers Association, which represents the banks, says the fees are defensible.
The ANZ says that while some fees may be unpopular, it believes they are lawful.
Andrew Watson from law firm Maurice Blackburn is heading up a case on behalf of 170,000 bank customers against all of the nation's major banks.
Mr Watson argues fees on late credit card payments, bounced cheques or overdrawn accounts are unfair.
"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."
The High Court appeal against the ANZ Bank is a test case.
It is 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.
"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," Mr Watson said.
Coming down
The Reserve Bank surveys banks fees every year.
Over the past 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 is now a third of that.
Nevertheless, Mr Watson says the fees are still too high.
"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."
RMIT University economics professor Sinclair Davidson disagrees.
"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 upfront," he said.
"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."
Push back
Professor Davidson says competition between the banks is what will bring fees down.
"But it will charge what they 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 policies will actually keep so-called excessive charges in check."
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.
"We're paying for the costs of the process up to the High Court and back and the substance procedure," IMF executive director John Walker.
"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."
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