By Mike Hedge
Seven centuries of legal precedent stand behind a bid to stop Australian banks charging customers exorbitant penalties for late payments or overspending on their credit accounts.
In Australia’s largest class action, 34,000 ANZ customers are seeking to stop the bank charging what they say are excessive dishonour fees.
It is estimated the action could potentially involve anyone with a bank account and could rip billions of dollars from the bottom lines of Australia’s banks.
Lawyer Andrew Watson of the firm Maurice Blackburn said no legislative change was being sought.
The litigants merely want banks to charge an amount that better reflects the costs to them when customers overdraw on their accounts or make late payments.
"We argue that within the bounds of the existing law all of these exception fees constitute penalties," Mr Watson said outside the Federal Court in Melbourne on Monday.
"We say …. there should be an expanded view in reference to the history of the law that’s developed since the 14th century.
"And what the law says, and has said for hundreds and hundreds of years, is that a penalty provision will not be enforced by the courts."
The litigants acknowledge the banks’ right to recover a "genuine pre-estimate" of its damages from a customer who breaches the terms of their account.
"What we are saying is that the fees in this case are in no way a genuine pre-estimate of damage," Mr Watson said.
The main kind of fees being dealt with are dishonour fees on accounts and over-limit and late payment fees on credit cards.
In the case of ANZ, the fee is generally $35.
"We say each of those types of fees are extravagant or exorbitant and customers should be recompensed for the amounts they’ve paid," Mr Watson said.
Lead counsel for the litigants, Jason Gleeson, told the court if ANZ didn’t want people to exceed their limits, they shouldn’t allow it to happen.
"A bank can reject a customer’s instructions and hold them to their current credit limit," he said.
Instead, it was the practice of banks to allow the customer access to an overdraft, and then penalise them and reverse the transaction.
"Instead of mitigating its loss, (the bank) collects a fee," he said.
ANZ is arguing that the fees in question are not penalties for a breach of contract, but are fees associated with services.
The bank said in a statement the current hearing would not provide a resolution for its customers.
It said further questions would need to be determined at the main hearing, which would probably take place during 2012 at which ANZ would continue to defend the claims.
The case before Justice Michelle Gordon is continuing.