In what will no doubt be a relief for financial institutions and a disappointment to some customers, the High Court, by majority, has dismissed two appeals from the Full Court of the Federal Court of Australia in relation to late payment fees charged by ANZ Bank.
It has been a long-running legal battle, commenced in 2010, and the High Court determination has upheld a decision that ANZ Bank was entitled to charge late payment fees of up to $35. The case was widely seen as a test case.
The case history
The first appellant (“Mr Paciocco”) held two consumer credit card accounts (“the accounts”) with the ANZ Bank. The terms and conditions of the accounts required Mr Paciocco, following receipt of a monthly statement of account, to pay a minimum monthly repayment. If the minimum monthly repayment plus any amount due immediately was not paid within a specified time, a late payment fee was charged. The late payment fee was $35 before December 2009, and $20 thereafter. 26 late payment fees were charged to Mr Paciocco’s accounts.
The case centered around whether the late payment fees were in fact penalties, alleging that the late payment fees, and various other fees charged by the Bank, were unenforceable as penalties.
Both the Bank and the plaintiff provided evidence as to the actual cost to the Bank caused by the late payment. The original determination was that the late payment fees were penalties because, amongst other things, they were extravagant and unconscionable in comparison with the greatest loss that could reasonably be proved.
On appeal, the Full Court held that the late payment fees were not penalties, preferring the evidence of cost provided by the Bank’s expert, which took into account additional charges including loss provision costs, regulatory capital costs, and collection costs.
By grant of special leave, the appellants then appealed to the High Court. The majority of the High Court dismissed the first appeal, holding that the Full Court was correct to characterise the loss provision costs, regulatory capital costs and collection costs as affecting the legitimate interests of the Bank.
The fact that those categories of costs could not be recovered in an action for damages did not alter that conclusion. Further, neither the fact that the late payment fees were not genuine pre-estimates of damage nor the fact that the amounts charged were disproportionate to the actual loss suffered by itself rendered the late payment fees penalties
What does that mean for consumers?
The case against ANZ was brought by law firm Maurice Blackburn on behalf of 43,500 customers claiming almost $60 million in overcharging and was seen as a test case; the dismissal of the appeal would put a number of other class actions in doubt.
Currently on CANSTAR’s database credit card late payment fees range from $35 to $0, with the distribution across the 200 cards analysed as follows.