Several law firms have shown interest in a possible class action against banks to recoup up to $5 billion in bank fees, according to a consumer advocate.
Consumer group Choice spokesman Christopher Zinn said he had been approached by "a number of" law firms in recent months, wanting to sound him out on the merits of a case against banks.
“It is an issue that has got people hot under the collar and we would look forward to a legal test to see if the fees are illegal and beyond the power of banks to charge.”
Litigant funder IMF yesterday said it would bankroll ten class-actions, to be argued by Maurice Blackburn, against Australia's largest banks in an effort to recoup $400 million of an estimated $5 billion in penalty fees and late charges it has slugged customers over the past five years. IMF said it had been deluged with consumers wanting to participate.
The "exception fees" range between $25 and $60 and penalise customers for overdrawn accounts and late payments.
The lawsuit, potentially one of the biggest in Australian corporate history, would target ANZ, Commonwealth, Westpac and National Australia Bank - and some regional and foreign lenders. NAB has already scrapped the bulk of the fees in response to consumer complaints.
“A business cannot fine you for doing something,” Mr Zinn said. “It can charge you a fee to recover its costs, but we have always argued… that the amounts were well beyond any possible costs that the banks faced.”
Mr Zinn, who would not reveal which law firms approached him, said banks had already admitted they had withdrawn and cut a number of fees because of a consumer backlash, partially in response to a Fair Fees campaign waged two years ago.
The Fair Fees campaign, organised in conjunction with the Consumer Action Law Centre in 2008, garnered 26,000 downloads of form letters allowing angry consumers to apply for refunds on unjustly charged bank fees.
In the United Kingdom, penalty fees were such a problem the government intervened in a test case two years ago to resolve the issue, said CALC director Nicole Rich.
“But in Australia the government really dragged its feet and didn't do that so now we're seeing a class action by law firms,” she said.
“I think it is a good development but we could have avoided a lot of this if the government actually accepted it was a problem years ago and stepped in to help consumers.”
Ms Rich said the case should be a “trigger” for unhappy consumers to shop around and bank with institutions that don't charge penalties.
University of South Australia professor David Round, who studies market regulation, said any case would be met with stiff resistance by the banks.
“They would tough it out on this,” he said, based on the huge money at stake. “Once any big guy gives, the tough image goes.”
Commonwealth Bank in announcing $1.5 billion in quarterly profit yesterday said its banking income had softened following reductions to its "exception" fees in late 2009.
czappone@fairfax.com.au
BusinessDay
