Throughout CHOICE’s long campaign against unfair bank fees we have always called the odd $45 the banks charged you for being late for a credit card repayment a ‘penalty’ fee.
The same applied for other high fees around being overdrawn on a transaction account or presenting a bouncing cheque - we saw them and called them as penalties.
The banks preferred the euphemism of an ‘exception’ fee because they classified the charges as a legitimate fee-for-service which was only recovering the costs they incurred because we were late or overdrawn or whatever.
Now the courts have shown how language has important legal ramifications. On Monday the Federal Court said late payment fees on credit cards could be seen as a penalty, as opposed to any-fee-for-service.
In this first test case against the ANZ, part of a class action involving more than 200,000 customers seeking redress against 12 banks for unfair fees, that finding could be worth $25 million.
If that sounds a lot, consider that at the highpoint of their penalty pipeline of profit, the banks raked in almost $1 billion a year in penalty fees from households alone. Nice work if you can get it but will the banks now be allowed to keep it?
Both sides are claiming victory. The lawyers for Maurice Blackburn who are running the case say the credit card penalty was the key fee because it hit more people with higher charges. The ANZ say a number of other ‘exception’ fees were found to be valid.
There’s talk of appeals and the main case hasn’t even begun yet. Then there are 11 other banks to go. But one thing all sides can agree on is that the stakes are high and deep pockets are going to be needed to fund the prolonged legal action.
In the meantime, there’s much speculation as to how the latest court decision might affect other late payment fees such as those which apply to bills from telcos and utilities and even video rental stores.
As a result of our fair fees campaign with the Consumer Action Law Centre, the banks reduced many penalty fees and withdrew others, with the NAB going further than most. Banks say customer complaints are down as a consequence.
But while these nakedly opportunistic fees are down, and some gone, it’s not beyond the banks to indulge in other tricks and distractions to gouge customers, which is why CHOICE is maintaining the scrutiny with our Better Banking Campaign.