Australia & New Zealand Banking Group Ltd. illegally charged customers for making late credit card payments, a judge said in the first ruling of its kind in Australia with lawsuits against other banks set to follow.
The late-payment fees amounted to “extravagant, exorbitant and unconscionable charges,” Federal Court Justice Michelle Gordon in Melbourne said in a 105-page judgment today. She dismissed other ANZ customer claims that the bank’s account fees for dishonoring a payment or exceeding account limits were also illegal. ANZ and the customers can appeal the decision.
The ruling has implications for other lenders, as Maurice Blackburn Lawyers has also filed suits against Citigroup Inc.’s Citibank, Commonwealth Bank of Australia, National Australia Bank Ltd., Westpac Banking Corp. and three other companies. Those cases were on hold pending the ANZ judgment.
“There is no reason why a bank with goodwill and the interests of its customers at heart could not come forward and now talk to us sensibly about a resolution of our claims against them,” Andrew Watson, head of class actions at Maurice Blackburn, told reporters in Melbourne today.
More than 185,000 Australians who were charged the fees by the banks signed up online to be part of the lawsuits with total estimated claims of more than A$243 million ($216 million), Maurice Blackburn said in a statement.
Bentham IMF Ltd., the Sydney-based company that funded the litigation, said the credit card late-payment fees represented about 25 percent of the total claims sought by ANZ customers. The same percentage is likely to apply to all the other major banks, except Citibank where the late fees represented about half the total claim, Bentham said today in a statement to the Australian Stock Exchange.
The implications of the judge’s ruling “are still far from clear,” ANZ Chief Executive Officer Phil Chronican said in a statement to the Australian Securities Exchange. “It is likely to be some time until this matter is finally resolved.”
Tracy Hicks, a Sydney-based spokeswoman for Commonwealth Bank, declined to comment on the ruling. Danny John, Westpac’s Sydney-based spokesman and Mark Alexander, a Melbourne-based spokesman for National Australian Bank also declined to comment. “We are waiting to review the judgment before we can comment,” Steven Blaney, a Sydney-based spokesman for Citibank said by phone.
The judge’s ruling could also potentially apply to utility providers or other companies that levy fees on customers for late payments, Watson said.
The judge ordered the two sides in the ANZ litigation to try to decide the damages that should be awarded by Feb. 12. She said she may hold another hearing to make a determination if they fail to agree.
ANZ had said it abolished 27 fees on personal accounts and reduced overdrawn, dishonor and late-payment fees in December 2009. The bank had to persuade the federal court judge that fees charged, including a A$45 dishonor fee and a A$29.50 fee for overdrawing an account, were reasonable to recover costs.
ANZ late fees of A$20 to A$35 compared with actual costs to the bank of between 50 Australian cents and A$5.50, Gordon said in her ruling.
The case is: Luccio Robert Paciocco v. Australia and New Zealand Banking Group Ltd. VID196/2013. Federal Court of Australia (Melbourne).