Warnings of a credit card late fee ‘free-for-all’ after High Court rules the practice is acceptable

WARNINGS of a free-for-all by banks that slug credit card users with hefty late fees have emerged, after a landmark High Court decision.

The nation’s highest court of appeal yesterday dismissed a six-year class action by ANZ customers, who argued the bank charged excessive fees for late payments on credit cards totalling $75 million in a single year.

Consumer advocates are now calling for new legislation to stop the “fee frenzy”, warning that banks will now have a free pass to charge as much as they like.

Late payment fees charged by Australian banks range from $15 up to $35, but there are bargains to be found; scroll down to compare the full list of credit cards.

Consumer Action Law Centre chief executive Gerard Brody said the decision allowed the banks to continue charging exorbitant penalty fees, calling on the government to legislate against the gouging.

“The fees charged by banks and other businesses need to actually reflect the cost and not be used to add to their bottom line,” Mr Brody said.

“Late credit card fees as high as $35 are ridiculous and bear no resemblance to what a late payment actually costs a bank.”

Alan Kirkland, chief executive of consumer group Choice, said the banks were charging out-of-proportion fees while posting record profits.

“This disappointing decision shows that our laws are not able to protect consumers from the powerful banking sector,” Mr Kirkland said. “With this decision, we expect the banks to continue their fee frenzy.” The average household pays about $468 a year in bank fees, or $9 a week.

The law firm that took the ANZ case to the High Court — and has similar class actions against the other major banks — also called for law reform.

Maurice Blackburn national head of class actions Andrew Watson said the ruling meant banking customers had no effective means to challenge bank fees which bear no relationship to their real costs.

“The law should recognise the reality of the banking transaction which is that customers ought not to be levied fees which bear no relationship to actual costs,” he said.

Mr Brody said with Australian consumer law under review, the ruling demonstrated why unfair contract terms needed to be a focus of change.

The ANZ class action argued that late fees of up to $35 were an exorbitant penalty that went far beyond the losses suffered by the bank as a result of late payments, which one expert witness estimated at $2.60. It looked at 2.4 million late fees worth $75 million in the 2008-09 financial year.

Herbert Smith Freehills partner Cameron Hanson said the court was not prepared to use consumer protection provisions to rewrite a contract freely entered into by a customer who knew the fees would be payable.

“The court accepted that companies have a legitimate interest in earning a profit and that fees and charges can be one of the ways in which they earn that profit,” Mr Hanson said.

“The court was also concerned that customers who pay on time are not effectively forced to cross-subsidise those customers who pay late.”

ANZ reduced its fee from $35 to $20 in December 2009, the year before Maurice Blackburn filed its class action.

Chief executive Fred Ohlsson has dismissed the predictions of a fee hike and opposes legislative changes.

“We have no plans to raise our fees at ANZ,” Mr Ohlsson told Fairfax Media.


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[source :-news]