ANZ credit card late fees court ruling

The Federal Court's ruling that ANZ's credit card late fees were penalty charges rather than cost recovery measures will send shockwaves far beyond the banking sector. Any and all businesses that charge late fees will now come under the spotlight.

To make a long story short, businesses aren't allowed to punish their customers for paying late in breach of a contract - they can recover the costs of late payment, but nothing more.

ANZ was charging $20 or $35 when that typical cost of dealing with late payments is actually between 50 cents and $5.50. Therefore, the court ruled ANZ's fees were unfairly levied and that customers should get a refund or reduction of the fees they paid.

This has implications for any bank that has charged a similar fee. Court actions are pending against all major banks but they do have the opportunity to head it off at the pass by declaring the true cost burden of late payments and refunding all excessive charges.

Outside the banking sector, phone companies and utility providers should be among those paying close attention - if their late fees are over and above cost recovery levels, they may find that they're asked to defend their action before a judge.

So what should consumers do when faced with an unreasonable late fee? Call the company and ask it to explain how the fee relates the costs it incurs because you paid late.

The court found that a flat fee is likely to be unjustifiable, so if that's what you've been charged, ask the company to justify it. If you're unconvinced by its response, hold off payment until you've spoken to an ombudsman. We'd also suggest that if an ombudsman service identifies late payment fees that are extravagant, it should consider it to be a systematic problem with the business's practice and negotiate an outcome for all customers, not just the one raising the issue.

It's worth noting that the court found a number of other bank charges were acceptable, including fees imposed for overdrawing your transaction account and credit card over-the-limit fees, and that the decision may be appealed by one or both sides.

But for now consumers should hold businesses accountable for their late fees - don't just let them pretend this ruling never happened.

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