By Adele Ferguson and Eric Johnston
THE nation's corporate watchdog blocked efforts by a litigation fund to mount a landmark class action aimed at seeking the return of up to $5 billion in penalty and late fees from banks.
The Australian Securities and Investments Commission in March rejected a request by litigation funder IMF Australia for a crucial exemption needed to be able to proceed with a class action against the banks.
Weeks earlier it refused to order five banks, including each of the big four, to hand over product disclosure statements necessary for the case relating to credit cards and savings accounts despite allegations this may have breached the Corporations Act.
ASIC senior executive Pamela Hanrahan last night defended the regulator's decisions saying it considers all allegations of unlawful conduct ''very carefully'' but decided not to pursue the matter.
''ASIC considers all allegations of unlawful conduct very carefully, its decision whether to devote public money to pursuing particular allegations involves balancing the public benefit,'' said Dr Hanrahan.
However IMF managing director Hugh McLernon said these decisions resulted in delays in launching the legal action, costing consumers around $3 million per day.
''In this case, as always, time is of the essence,'' McLernon said.
''We have already been held up for 2 ½ months by ASIC's refusal to grant an exemption from the managed investment scheme requirements. In addition, the matter will be held up further if the banks continue to deny us copies of their product disclosure statements,'' he said.
IMF this week launched a class action against a several banks including ANZ, Commonwealth, National Australia and Westpac, claiming there has been a systematic gouging of bank customers over so-called exception fees.
For the first time last year the Reserve Bank broke down the level of exception fees paid by bank customers. Combined households and businesses shelled out $1.16 billion in exception fees - around 10 per cent of banks total fee income - with households making up most of the figure mainly given penalties on deposit and credit card accounts.
In late 2005 the Australian Consumers Association raised questions over the legality of exception fees, but this was later dismissed by the ABA as being ''an unsubstantiated assertion''.
Indeed most of the past decade the Australian Bankers Association has argued that exception fees which include dishonour fees, credit card late payments were avoidable.
The ABA yesterday declined to comment, saying any legal matter would be for the court to decide. Craig Williams, a bank analyst with Citigroup estimated the cost to the bank industry if the claim was successful could reach between $200 million and $800 million.
Most at risk would be Commonwealth Bank which faces as much as $200 million while Westpac could be forced to repay more than $180 million, he calculates.
However Mr Williams noted recent moves by banks to remove the equivalent of $900 million in annual fees, would have already reduced the risk of political intervention in the matter.
National Australia Bank chief executive Cameron Clyne recent noted the risks of government intervention in the banking sector were rising. NAB last year broke ranks with its rivals through the removal of a raft of exception fees, mostly as part of a broader efforts to overhaul the bank.