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ANZ Customers Can Proceed With Part of Lawsuit Over Credit Card Charges

Australia & New Zealand Banking Group Ltd. (ANZ) customers seeking to recoup fees they claim were illegal can proceed with part of the lawsuit after a judge ruled credit- card charges for late payments can be challenged in court.

Federal Court Justice Michelle Gordon issued the ruling in Melbourne today, dismissing complaints about charges for insufficient funds in accounts or overdrawn bank accounts, ruling those didn’t amount to penalties.

ANZ is the first of 12 banks that IMF Australia Ltd. (IMF), the country’s biggest litigation funder, planned to sue in a bid to recoup as much as A$5 billion ($5.1 billion) that Australian account holders paid in fees in the past six years, according to James Middleweek, managing director at IMF’s Financial Redress Pty unit. Customers holding almost 246,000 accounts have registered to sue, according to IMF’s website.

“This is the first important ruling in what will undoubtedly be a long, drawn-out process,” Middleweek said in a phone interview today.

The credit card late-payment charges make up about 40 percent of the A$50 million in refunds for so-called exception fees sought by ANZ’s customers, Andrew Watson, a principal at Maurice Blackburn Lawyers, who is representing the plaintiffs, said in a phone interview.

ANZ, based in Melbourne, said it welcomed the ruling because it was largely vindicated by it.

“Our consistent position has been that while some of these fees may have been unpopular, we believe they were lawful,” Philip Chronican, the bank’s chief executive officer, said in a statement today.

Late Payments

Chronican said at a news conference in Melbourne that the bank hasn’t decided whether to appeal the ruling against it on credit card late payments. He said the fee, which has been reduced to A$20 from A$35 since the suit was filed, is reasonable and covers costs including those incurred by hiring collection agencies. The bank will defend the fee in the second stage of the trial, he said.

At issue in the decision was whether the bank fees could be characterized as penalties, in which case they could be challenged in court as excessive and therefore illegal.

Gordon ruled honor fees, A$29.50 charged when a bank cleared a check even though there wasn’t enough money in the account, dishonor fees, A$45 charged when a check bounced, and credit card fees when customers exceeded their approved limit couldn’t be characterized as penalties. A A$35 late payment fee for credit cards could be characterized as a penalty, she said.

Average Claim

The decision will “almost certainly” be appealed, Watson said. He said the High Court of Australia, the country’s top court, would probably have to decide whether the concept of penalties can be expanded to include those charges rejected by Gordon.

The average claim for each customer involved in the lawsuit is about A$1,500, ranging from several hundred dollars to more than A$35,000, Maurice Blackburn said when it filed the case last year.

The case is: John Andrews v. ANZ Banking Group Ltd. VID811/2010. Federal Court of Australia (Melbourne).

To contact the reporters on this story: Brett Foley in London at bfoley8@bloomberg.net; Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Edward Johnson at ejohnson28@bloomberg.net

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