The days when banks can slug credit card holders with late payment fees may be numbered thanks to a Federal Court ruling against ANZ Bank.
In a ruling described as a "great leap for Australian consumers", the Federal Court has found late fees charged on the cards could be characterised as a penalty and may be legally unenforceable.
However, honour fees, dishonour fees, over-limit fees and non-payment fees were not characterised as a penalty but as fees for services provided by the bank, Justice Michelle Gordon found in a judgment.
The ruling was handed down on Monday in a class action brought by litigation funder IMF Australia and lawyers Maurice Blackburn, which were claiming over $50 million for 27,199 customers over alleged fee gouging.
Now IMF and Maurice Blackburn have other big banks in their sights, with the law firm's principal, Andrew Watson, telling reporters that litigation against ANZ's rivals was likely in the next few days.
"This is one small step in the litigation but one great leap for Australian consumers.
"We will digest the judgment and then we will move with alacrity ... to take what action needs to be taken against other banks."
Justice Gordon said consideration of the quantum of the late payment fees on credit cards, and whether their size was out of proportion to the likely damage suffered by ANZ, would be deferred to a later hearing.
Thirteen other bank fees were found by Justice Gordon not to be penalties and IMF said it will consider appealing these decisions.
The judgment came almost two years after ANZ scrapped exception fees for recipients of government benefits, and abolished a range of other fees, as the bank battled its rivals in a public relations war.
Its three big bank rivals cut exception fees across a range of accounts by August 2009 after the Reserve Bank of Australia revealed the industry reaped about $1.2 billion, or 10 per cent, of its total revenue from exception fees in 2007/08.
Before the banks moved, late payment fees on credit cards were around $35.
ANZ and Commonwealth Bank (CBA) now charge a $20 late payment fee on credit card accounts, while Westpac charges $9.
National Australia Bank charges a late payment fee of $5 on credit card accounts with balances of $50 or more.
ANZ welcomed the ruling, which it said contained favourable outcomes on four of the five fee types in question.
Whether the late payment fee is in fact a penalty will be examined in the main trial in 2012, it said.
"Our consistent position has been that while some of these fees may have been unpopular, we believe they were lawful and were pleased this has been largely vindicated," ANZ Australia chief executive Philip Chronican said in a statement.
"The one finding in IMF's favour does not provide a resolution for class action participants."
Mr Chronican added that it was a complex case, and ANZ would continue to vigorously defend the action.
Bell Potter Securities analyst TS Lim said the court ruling on late payment fees was immaterial because it involved only tens of millions of dollars for each bank.
CBA and Westpac would be hit the hardest by litigation that succeeded, he said.
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