Gareth Vaughan interest.co.nz July 30, 2013
The group suing ANZ over "excessive" fees on behalf of some of the bank's customers has listed four causes of action in its statement of claim, arguing "exception" fees in contracts were set by ANZ "diktat", and that publicly available information suggests the cost of such fees to banks is substantially less than the actual fees charged.
"Exception" fees at the centre of the case are what are known as honour or unarranged overdraft fees, dishonour or payment failed fees, credit card late payment fees, and credit card over limit fees.
Aside from the action filed against ANZ last month, Fair Play on Fees, which includes New Zealand lawyer Andrew Hooker, Australian law firm Slater & Gordon and Australian litigation funder Litigation Lending Services, is also promising to take cases against New Zealand's other major banks over the same fees.
In its statement of claim Fair Play on Fees lists its causes of action as;
1) Penalty imposed upon breach of contract.
2) Penalty in equity.
3) Breach of implied term.
4) Exception fees are unreasonable default fees pursuant to section 41 of the Credit Contracts and Consumer Finance Act 2003.
Hooker says the fees in question only cost banks a few cents rather than the up to $20 ANZ charges, which is down from up to $30 four years ago. He says sister banks ANZ and National have overcharged customers by about $250 million over six years.
ANZ has said it will "vigorously defend" the claims. Kerri Thompson, ANZ's managing director for retail banking, has told interest.co.nz the bank has mathematical calculations backing up the basis of its fees.
Thompson also said ANZ is very upfront about exception fees, with them being set out in its terms and conditions provided to customers. Furthermore, exception fees are avoidable and most New Zealanders don’t pay them in any given year.
But elaborating on its first cause of action, Fair Play on Fees argues publicly available material indicates the cost to ANZ, and other banks, of responding to the circumstances where an exception fee is charged is substantially less than what's charged. It cites eight articles or reports in support of this claim. Dating from 1991, the most recent of these is a 2006 report from the British Office of Fair Trading entitled Calculating Fair Default Charges in Credit Card Contracts - A Statement of the OFT's Position.(See a list of the other seven at the foot of this story).
Fair Play on Fees argues the size of each exception fee was decided by the dominant party to the contract between bank and customer, being the bank, and that amendments or changes to the value of the fees during the term of contracts arose through a "diktat" by ANZ rather than through a consensus or pre-estimate.
What they want
Fair Play on Fees is seeking;
A declaration that the penalty provisions and/or exception fee charges, from ANZ and National Bank, are wholly unenforceable and/or void as a penalty.
Or, a declaration that the penalty provisions and/or exception fee charges are unenforceable and/or void as a penalty to the extent that the exception fees charged exceeded the loss or damage suffered by the defendant as a result of the events giving rise to the charging of the fees.
An order that ANZ repay the exception fees or the amount by which the fees exceeded ANZ's actual loss or damage as a result of the events giving rise to the charging of the fees. And;
An order that ANZ repay any interest charged on the exception fees, or that part of the exception fees that exceeded the loss or damage suffered by the defendant as a result of the events giving rise to the charging of the fees.
Fair Play on Fees also seeks interest and costs.
When filing proceedings against ANZ in late June Hooker said more than 32,000 people had registered with Fair Play on Fees, with the case against ANZ including the claims of about 13,500 individuals and 1,800 small businesses across an estimated 30,000 accounts.
Fair Play on Fees is pledging similar legal action against ASB, BNZ, Kiwibank and Westpac, and has hired Bruce Gray QC as its lead counsel, plus barrister Daisy Williams.
The statement of claim lists the plaintiffs as lead plaintiff Sandra Norma Cooper, plus Craig Richard Jones, Ivor Marquise de Menefy, and INK NZ Limited, which is described as a property investment company and has de Menefy listed as its shareholder and director in the Companies Office website.
'Penalties in equity'
Through its second cause of action Fair Play on Fees argues the exception fees are penalties in equity because if a sum due to the bank in respect of a customer's account isn't paid on or before a specified date, then the customer is charged a late payment fee.
"The overdraw fees were not in fact charged by National Bank or ANZ because a request for further accommodation was made by a customer, but were charged because an overdrawing transaction was initiated or because a customer's account was overdrawn or a credit limit exceeded," the statement of claim says.
"The exception fees were out of all proportion or unrelated to the loss or damage which the defendant might have sustained by reason of a failure of a Timely Payment Stipulation or an Overdraw stipulation."
On the third cause of action, Fair Play on Fees argues the right to adjust the amount charged for the exception fees was subject to an implied term that any amendment would be fair and reasonable, enabling the bank's decision on the value of the fee to be objectively tested. It says the quantum of each fee, following entry into the contract between bank and customer, was subsequently not fair and reasonable. This means customers have suffered loss and damage, being the value of fees paid in excess of an objectively fair and reasonable sum.
Here, Fair Play on Fees wants damages suffered by its plaintiffs to be "particularised following discovery," plus an inquiry into damages suffered by other customers who have signed up for the case.
'Breach of the Credit Contracts and Consumer Finance Act'
As for the fourth cause of action, Fair Play on Fees argues penalty provisions and/or exception fee charges in the contracts between bank and customer are default fees within the meaning of section 5 of the Credit Contracts and Consumer Finance Act. And they were and are unreasonable and in breach of the prohibition in section 41 of the Act.
The group wants an order under section 48 of the Act requiring refunds, compensatory damages, exemplary damages and consequential relief.
Fair Play on Fees stands to keep 25% of any of the money won through their action, plus getting back Litigation Lending Services' costs, which Hooker has put at between $3 million and $4 million.
Here are the other 7 articles and reports cited by Fair Play on Fees in support of its claim that publicly available material indicates exception fees cost banks much less to implement than they charge:
R Haberfield and J Harrington 'Bounced Checks Boost Profits; NSF fees and other revenue sources offer untapped potential, contends this checking account expert.' Published in Savings Institutions March 1991.
Prices Surveillance Authority, Inquiry into Fees and Charges Imposed on Retail Accounts by Banks and Other Institutions and by Retailers on EFTPOS Transactions, June 30 1995.
Financial System Inquiry Final Report (Wallis Report) March 1997.
ATM Surcharges Rising, Bank Rate Monitor 1997.
Janice C Shields, Bounced Checks: Billion Dollar Profits II, 1998, Consumer Federation of America.
Boston Consulting Group, The Untapped Power of Pricing: Opportunities for Action in Financial Services, 2002.
Rich, Nicole, Unfair Fees: A report into penalty fees charged by Australian banks, Consumer Law Centre, December 2004.