No banks off hook in class action

Fair Play on Fees: Andrew Hooker (centre) launches class action against banks

No banks are off the hook in the class action to claim back more than $1 billion in excessive bank default fees, the New Zealand lawyer leading the legal action says.

North Shore lawyer Andrew Hooker announced the class action 'fair play on fees' – understood to be the largest in this country's history – alongside two Australian lawyers today.

Mr Hooker says the country's four major Australian-owned banks – Westpac, ANZ, ASB and BNZ – are all "up to their armpits" in the alleged over-charging.

Kiwibank is not exempt. Mr Hooker says the state-owned bank has been steadily charging the fees for years, "sometimes more than the Australian banks".

Mr Hooker estimates the amount of default fees collected unfairly by the banks over the last six years to be more than $1 billion. About 15% of that would have been incurred by businesses, he says.

These fees occur when customers overdraw their account, pay their credit card too late or bounce a cheque.

Mr Hooker is calling for New Zealanders to sign up to participate in class actions to claim this money back.

Within an hour of the announcement, the website www.fairplayonfees.co.nz had already received more than 300 registrations and 110 sign-ups.

The class action is being backed by Australia's largest consumer law firm, Slater & Gordon, which will lend its expertise as legal advisers.

Claimants have no up-front costs. The entire litigation process is funded by litigation funding firm Litigation Lending Services NZ, and all legal fees are rendered on a no-win, no-fee basis.

Mr Hooker says he is confident of getting the minimum 10,000 registrations required for the class action to go ahead.

Contract law principle

Mr Hooker, whose 20-year career in civil litigation includes representing customers against their insurance companies, says the case will be based on a principle of contract law, which places a limit on the amount a customer can be charged if they default on an obligation.

He says customers are being charged an average of $15 every time they overdraw their accounts, pay their credit card late or bounce a cheque.

Standard, monthly account-keeping fees, interest charges and ATM fees are not included in the action.

The onus will be on the banks to show what it actually cost them when a customer is in default to meet a payment, Mr Hooker says.

"We say the actual cost to the bank is a couple of cents when those instances take place, but ultimately that will be for the court to decide."

Banks have ignored the principal of contract law for years and customers have been helpless to fight them, Mr Hooker says.

"Why would you sue a bank for $15 or even $20? That is why we have a class action."

He says New Zealanders are not used to this concept of class action.

"I think the institutions in New Zealand are used to keeping their heads down and hoping the punters go away.

"A class action is the only way banks can be held accountable and prevented from charging excessive fees now and into the future.

Mr Hooker estimates 20% of New Zealanders have regularly incurred these excessive bank fees.

No action has yet been filed in Auckland High Court.

Across the Tasman, the Australian parent companies of New Zealand's major banks are also being sued over the same allegations.

gbond@nbr.co.nz

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29 Comments & Questions

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Someone read too much John Grisham

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Will be the start of something bigger. Credit card fees charged by retailers will be next. Basically an argument about 'real' cost. Be interested to know if tax is paid on such bank charges due to such being designated income.

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Of course tax is paid on bank charges as they are income to the banks.

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think you will find that is the whole point of the case then

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When small merchants are charged upwards of 6% on credit card transactions, there is a problem. I agree the banks should be hauled over the coals for the amounts they charge on processing those transactions. While I do not support retailers passing those fees on, I can sympathise.
I also think the minimum monthly merchant fee is also a disincentive to credit card acceptance for many small merchants, and does not need to be so high.

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Well I do support retailers passing these costs on. If they don't add costs per transaction, then they must build it into their overheads, so that everybody pays. Credit card use is not compulsory so those who choose it should pay the cost.

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Monthly account fees are equally unjustifiable. "Only" $12.50 or $5 or some other random number per month, yet added together is a mighty big cash grab and added together over a customer's lifetime, even a few years, is not small change they've whipped out of your back pocket. The interest rate spread and transactional fees are more than enough to 'maintain' the very accounts banks need to survive.

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Big, juicy, target - low-hanging fruit.

Populist rhetoric from an "ambulance-chasing/no win-no fee" opportunist?

Yep - banks make millions/billions in profits, who are also the "natural" enemy of the socialists/left politicians simply because they are commercial entities and make profits, rather than being State owned the leftie politicians can attempt to dictate to.

Banks being sued for a Billion dollars makes for great headlines, but is this a paid-for advertorial for the opportunist trying to side with the left politicans that all "hate" any business that makes a profit.

Just wait for the orchestrated bank-bashing now from various left entities... and this will all make better sense.

Profit is not a dirty word, but corrupt socialist policies certainly are!

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What part of "Australia's biggest law firm" are you referring to when you say "socialists/left politicians"?

Besides, what's wrong with a sport of orchestrated bank bashing? It should happen more often, regardless of which political colours you fancy.

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The Banks are ripping people off. I was one day late on a credit card payment. The interest on the one day was an annualised rate of 649%, and this does not include the $15 also charged.

When I questioned the charge, I received the run-around from the help centre. They did their best to tell me everything but they way they calculated the penalty interest. When they realised I was not going to let go, they suggested I contact another department. They would not give me their phone number or a contact email address. I had to put my query in writing and fax it - which of course I have now done.

A class action is the only way to level the playing field,

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When that happened to me, they refunded it straight away. Time to change banks?

Plus, I am sure you were given list of fees when you signed up for your card and were sent a statement saying the date and amount that should be paid. They have given you up to 55 days interest free credit and you complain that when you don't pay, they charge you interest.

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You're beginning to grow on me, Harvey.

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Maybe. Can't remember the last time the bank told me anything useful. Least of all, how they calculated any of the various moneys I'm obliged to pay them. I did see some paperwork. Read it. Didn't understand. Asked some questions. Understood half what they said. Thank God I'm a professional researcher. Can't believe most people would stick at it, and no doubt the banks take advantage of this. My wife nearly killed me because I kept asking simple questions nobody could answer.

Change banks? I WAS changing banks.

"Honour" fees are a classic. It's a product that few, if any, people sign up for in advance, and which many people don't notice until several have been paid.

The bank - like any other business - should be able to account for its billing transparently and simply, whenever the customer wants.

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This is not the only rip-off banks engage in. A few years back I had a flexible mortgage with major lender. Being an investment analyst I was interested in the detail behind their interest charges which seemed a little high. I eventually extracted the calculation details from them, which revealed they were charging the full interest rate on the portion of the loan that had not been drawn down! They refused to take any notice of my concerns until I said I was taking the matter to the Banking Ombudsman. Within a week or so I got a refund amounting to tens of thousands of dollars.

Clearly, they were doing the same to everyone and they did not want the publicity that the Ombudsman's decision would have attracted. I now regret not taking it to the Ombudsman, but this is a good example of where a litigious legal firm could have gained huge refunds for clients and potentially brought a rogue lender to their knees (perhaps they are all rogues).

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About time. Westpac called it an honour fee. Charged $30 for the privilege. Just waiting for the Commerce Commission revisiting credit card gouging by anyone who can get away with it.

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What sort of a Communist state are we heading for ?
Since when is profit 'too much' ?
Pricing is what the market will stand and profit is the difference between that and cost
God spare us from greedy lawyers with their class actions

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Is this class action not a sign that the market will not stand for rorting? Charging for costs incurred plus a profit margin is one thing, but to nominate a set fee which does not meet that criteria is another.
If it costs only 25 cents and is charged at $15 (just for example sake), that's a 6000% mark-up - not reasonable "cost-plus" by the working population's maths...

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With a capital reserve ratio of 4% could this bankrupt a few banks?

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There is definitely a bigger picture here around the lending practices of banks in this country. We bear all the risk and the banks take no responsibility yet charge huge interest rates and penalty fees that yield them record profits year on year. Then when they get it wrong they expect to get bailed out by our government. They will also use all of their power and money to to make sure borrowers are are made bankrupt if they default due to unforeseen problems which ruins their lives. How is this responsible lending? Now is the time for more regulation from our government. The hard-working, honest people and businesses of New Zealand are being ripped off by these Australian banks.

Here is a thought... In America people can get a fixed interest mortgage at 0.5% locked in for 30 years.

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I wish them well.
Joe average Kiwi wouldn't get out of bed over any grievance and it's nice to see a local lawyer supported by a couple of Aussies used to the cut and thrust of class actions having a go. If nothing else, it will shine a light on the true cost of using these services.

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Ambulance chasing lawyers V's the banks. Aah, isn't life wonderful.

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Bank fees are avoidable and are publicised so it is hard to see that the consumer is being ripped off. Will those who join the class action be liable for legal costs incurred by the Banks if they lose the lawsuit and costs are awarded to the Banks?

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So will lawyers be forced to charge fees based on what it actually cost them? I can remember being charged some pretty fancy fees for the provision of 'photocopies' by members of the legal fraternity I have had the pleasure of dealing with.

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English and Australian banks refunded billions in excessive overdraft fees after similar legal fights. Why should we expect their local branches to have behaved any differently?

Perhaps Kiwis should follow the US example and start "de-banking".

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Yes, we all complain about the bank fees we pay, but what do you think about the level of legal fees? When this action is over the best you can expect might be a 60% refund of a small amount. It won't even be a sixth division Lotto win. The lawyers will walk away, no doubt looking for an offshore bank for their money. We will be left still dealing with our banks, which are now crippled by the settlement and legal fees and needing to put up their fees. Our lawyers would be better focused on bringing real criminals to justice - it's no wonder it takes two years to five years to get finance company cases dealt with or murderers and rapists brought to justice. They don't have the profile or pay the big fees.

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No bank will be crippled by having to give back that which they obtained illegally ... they can just cut the bonuses they pay to cover it!

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The lawyer appears to be a street-brawling opportunist who sees a way of improving his income. Why not negotiate and discuss this on behalf of customers? After all, there is a Banking Ombudsman, Commerce Commission and other complaint bodies. But these options do no suit the purpose of the litigation one suspects.

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Hello anonymous investment analyst. Would you please contact me in confidence at janderson@nbr.co.nz about your unpublished comment .

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I have a set of non-profit accounts on my desk which in a specific year wrote out 92 cheques,made 2 deposits, but because the person in charge of the cheque account did not monitor it and ensure that transfers were made from a deposit account,the bank charged 30 honour fees.

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