$6b lawsuit targets Australian banks

The Commerce Commission is investigating exception fees charged on credit cards. Photo / Dean Purcell

The company behind a A$5 billion ($6.2 billion) class action lawsuit against a number of Australian banks says it would also consider launching a suit in New Zealand if the laws permitted and there was enough interest from aggrieved banking customers.

But a New Zealand legal expert says it's unlikely a similar case would go ahead because it would be too expensive for individuals to make it worthwhile.

Yesterday the Sydney Morning Herald said Australian litigation funder IMF Australia would pay for more than 10 class actions against Australian banks including the "Big Four" - Commonwealth Bank, ANZ, Westpac and National Australia Bank - in a bid to claim back penalty and late fees for the last six years.

IMF Australia alleges the exception fees which include honour fees, dishonour fees for bounced cheques, late payment fees for credit cards or loans and fees for overdrawing credit cards, have been out of proportion to the costs incurred by the Australian banks.

Last year the Reserve Bank of Australia revealed its banks charged exception fees of A$1.2 billion in the 2008 financial year. It was the first time exception fees have been made public.

Australia's banks own New Zealand's ANZ, National, Westpac, BNZ and ASB.

Yesterday IMF Australia's Hugh McLernon said it was not likely that New Zealanders could join in the Australian lawsuit but it would consider a separate suit in New Zealand.

"We are already funding cases in New Zealand. It would be a natural follow up to check and make sure the law is the same. It makes sense to look at other common-law countries. We would have to make sure the same laws applied and if there is sufficient interest. But we will certainly have a look at it."

But Chapman Tripp partner Matt Sumpter said New Zealand did not have the ability to take class actions like the one in Australia.

"We don't have a comparable system here."

Sumpter said while it was possible to band a group of people together to sue a company it would be uneconomical.

"You might get 3000 to 5000 people who were owed $100 to $200 by a big bank but it's not economically feasible [to take a case]."

Sumpter said in New Zealand it was up to the regulator the Commerce Commission to take action if it believed there was a case.

A spokeswoman for the Commerce Commission said it did not wish to comment on the legal action in Australia, which was being taken under different legislation.

The commission is investigating exception fees charged on credit cards under the Credit Contracts and Consumer Finance Act.

Those fees include default fees such as late payment fees and over limit fees.

The CCCF Act only covers consumer credit contracts and not personal accounts. The spokeswoman said it would not make further public comment on the investigation.

Banking ombudsman Deborah Battel said it was up to the regulators to decide whether action could be taken. "It's hard at this stage to say whether it is likely to have a flow-on effect here."

Battel said default fees had not been a "huge area" of complaints for the ombudsman office and often if there were complaints they were handled by the banks themselves.

A spokesperson for the New Zealand Bankers Association said it did not wish to comment on the Australian case. Last year both Westpac New Zealand and the Bank of New Zealand cut exception fees.

THE AUSSIE CASE

* IMF Australia has launched a A$5 billion class action against Australian banks over penalties and late fees charged
* The firm alleges the size and extent of the fees have been out of proportion to the costs incurred by banks
* Australians paid A$1.2 billion in exception fees in 2008