Class action targets excessive bank fees

A class action against banks for the billions of dollars they made from what it is
claimed to be unfair exception fees is being bankrolled by litigation funder IMF
Australia Ltd.
The class action would be for the repayment of exception fees deducted from bank
customer accounts during the past six years by local and foreign banks, IMF said in
a statement.
Financial Redress Pty Ltd, a wholly owned subsidiary of IMF, will be responsible for
organising each class action.
It was estimated the big four banks plus eight others operating in Australia reaped
$5 billion in exception fees during the past six years, Financial Redress chief
James Middleweek said.
Exception fees are levied on customers who go over account limits, make late
payments on things like credit cards or home loans or sign bounced cheques.
The case relies on the agreed damages clauses of contracts between banks and
customers, and whether banks can charge more than the actual cost to recover their
loss.
"In contract law you can only recover, basically speaking, your loss," Mr Middleweek
told AAP.
"If something costs the banks a few cents, or a dollar at the most, and they charge
you $40 or $50 then it is so out of proportion to the true cost, it may constitute a
penalty.
"Under fair trading legislation in certain states, it could well be unreasonable,
too," Mr Middleweek said.
He said fees such as those relating to using a rival banks automatic teller machine
were service fees and not covered by the class action.
Mr Middleweek said his company hoped to attract about 100,000 bank customers to
participate in the action.
"We would be very disappointed with less than 100,000 people, and if we got 20 per
cent of the total it would probably be about five million people or businesses
affected," he said.
The Reserve Bank of Australia has reported that banks charged about $1.2 billion in
exception fees in 2008/09.
While individual banks contacted by AAP refused to comment, the Australian Bankers
Association (ABA) said it had seen reports IMF was going to take this action.
"If IMF proceeds, then ultimately it is for the courts to decide the merits of this
claim," the ABA statement said.
Last year National Australia Bank and Westpac axed some of their exception fees, and
on Wednesday Commonwealth Bank of Australia cited reductions to retail exception
fees for softer, other-banking income in its March quarter report.
Australian Consumers Association spokesman Christopher Zinn backed the legal action,
and said his organisation had an ongoing campaign about bank fees.
Mr Zinn said the action may cast the spotlight on other late payment fees such as
those imposed by video shops for returning movies after an agreed time.
Those seeking more information about the class action can visit
www.financialredress.com.au or call 1300 473 373.
IMF shares closed up 14.5 cents, or 10.1 per cent, at $1.58 on Wednesday.