500,000 are expected to claim
(14 May 2010 – Australia) The solicitors running the largest class action in history against Australia’s banks have had an overwhelming public response, with up to 500,000 expected to join the class action against local and foreign banks for repayment of dishonour and late fees.
In 2008 alone Australian banks filled their balance books with nearly A$1.2 billion in fees.
The fees were collected through honour fees, usually being a penalty fee of A$40, applied when a customer overdraws on a bank account or exceeds an agreed overdraft limit and the bank pays it out; and dishonour fees, which are incurred for cheques that bounce; late payment fees for credit cards or loan accounts; and fees for overdrawing on a credit card.
These fees typically range between A$25 and A$60 on each transaction.
The argument against the banks is based in the fact that the banks charged a hefty penalty instead of a reasonable fee that is more in line with actual costs.
Financial Redress has said that the banks have illegally charged well over A$5 billion over the past six years.
James Middleweek, managing director, Financial Redress has said that the action will try to recoup as much of the A$5 billion as possible, but it depends how many people make claims.
Realistically if 300,000 to 400,000 people to sign up over the course of the next few weeks and months it would become a 600, 700, 800 million [dollar] class action, Mr Middleweek added.
Bernard Murphy, Maurice Blackburn Lawyers, the solicitors handling the case, has said that the public response has been overwhelming, with the firm receiving over 3,000 registrations on the company's website as of last night.
The case will hinge on contract law and the fact that penalty fees are in excess of what it costs the banks to process late payments or bounced cheques, Mr Blackburn noted.
The firm’s chairman also said that there's a contract law provision which states that if one party breaches a contract the victim of the breach is only allowed to charge a genuine pre-estimate of the damages for that.
So the situation with the class action is that a person who overdraws the account in breach of the contract with the bank and the bank's entitled to charge a genuine pre-estimate of the actual cost of that, Mr Murphy said.
Now that genuine pre-estimate would be, in some cases in relation to credit cards overdrawn, several cents. In relation to cheques, maybe A$2, Mr Murphy added.
Banks have been charging A$25 to A$60. The firm believes that these charges are extravagant and exorbitant. The law says that if those charges are extravagant or exorbitant then they amount to a penalty, which is illegal, Mr Murphy said.
The fees were collected through honour fees, usually being a penalty fee of A$40, applied when a customer overdraws on a bank account or exceeds an agreed overdraft limit and the bank pays it out; and dishonour fees, which are incurred for cheques that bounce; late payment fees for credit cards or loan accounts; and fees for overdrawing on a credit card.
These fees typically range between A$25 and A$60 on each transaction.
The argument against the banks is based in the fact that the banks charged a hefty penalty instead of a reasonable fee that is more in line with actual costs.
Financial Redress has said that the banks have illegally charged well over A$5 billion over the past six years.
James Middleweek, managing director, Financial Redress has said that the action will try to recoup as much of the A$5 billion as possible, but it depends how many people make claims.
Realistically if 300,000 to 400,000 people to sign up over the course of the next few weeks and months it would become a 600, 700, 800 million [dollar] class action, Mr Middleweek added.
Bernard Murphy, Maurice Blackburn Lawyers, the solicitors handling the case, has said that the public response has been overwhelming, with the firm receiving over 3,000 registrations on the company's website as of last night.
The case will hinge on contract law and the fact that penalty fees are in excess of what it costs the banks to process late payments or bounced cheques, Mr Blackburn noted.
The firm’s chairman also said that there's a contract law provision which states that if one party breaches a contract the victim of the breach is only allowed to charge a genuine pre-estimate of the damages for that.
So the situation with the class action is that a person who overdraws the account in breach of the contract with the bank and the bank's entitled to charge a genuine pre-estimate of the actual cost of that, Mr Murphy said.
Now that genuine pre-estimate would be, in some cases in relation to credit cards overdrawn, several cents. In relation to cheques, maybe A$2, Mr Murphy added.
Banks have been charging A$25 to A$60. The firm believes that these charges are extravagant and exorbitant. The law says that if those charges are extravagant or exorbitant then they amount to a penalty, which is illegal, Mr Murphy said.
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