Australian class action could hit NZ banks

A class action against Australian banks for the billions of dollars they made from what is claimed to be unfair exception fees is being bankrolled by Litigation funder IMF Australia Ltd, and could extend to this side of the Tasman.

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 estimated the big four banks plus eight others operating in Australia reaped $A5 billion ($NZ6.27 billion) in exception fees during the past six years.

Australia's banks own New Zealand's ANZ, National, Westpac, BNZ and ASB.

IMF Australia's Hugh McLernon told the New Zealand Herald it was not likely that New Zealanders could join in the Australian lawsuit but it would consider a separate suit in New Zealand.

It was already funding cases in New Zealand and it would be a natural follow up to check and make sure the law here was the same, he said.

But Chapman Tripp partner Matt Sumpter said New Zealand did not have the ability to take class actions like the one in Australia.

"We don't have a comparable system here."

Mr Sumpter said while it was possible to band a group of people together to sue a company it would be uneconomical and it was up to the regulator the Commerce Commission to take action if it believed there was a case.

The commission would not comment.

Andrew Campbell, of New Zealand bank workers' union Finsec, told BusinessDay banks here had reduced the charges "to much fanfare" indicating that they were potentially overcharging customers.

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 Australian 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," Financial Redress chief James Middleweek told AAP.

"If something costs the banks a few cents, or a dollar at the most, and they charge you $A40 or $A50 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 $A1.2 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.

IMF shares closed up 14.5 cents, or 10.1 per cent, at $A1.58.