A banking expert says a bid to take a billion-dollar class-action lawsuit against New Zealand's banks is ambitious and the amount claimable appears to be inflated.
Yesterday, Auckland barrister Andrew Hooker, backed by Australian law firm Slater & Gordon and Australian litigation funders Litigation Lending Services, announced plans to take on the main banks to claim back "excessive" default fees charged over the last six years.
Mr Hooker said up to a million Kiwis could be eligible to join in the action. By 5pm, yesterday close to 1000 people had registered online to join it.
New Zealand banks made record profits last year and over the past six financial years have had a combined net profit of $16.4 billion.
Mr Hooker said the banks had been illegally overcharging Kiwis for many years on transactions for overdrawn accounts, late credit card payments and bounced cheques. He claims the banks have breached contract law by charging a fee that is higher than what it costs them when the payment defaults.
The group said bank customers were being charged around $15 every time they overdrew their accounts when they estimate it costs the banks only a few cents when that occurs.
Mr Hooker said Kiwis could be paying up to $1500 more a year than they should be. "After they have taken the money it is up to the customer to fight them."
But few people would take their bank to court for $15, he said. "The banks rely on this."
There is no up-front costs to those who register to join the class action but the firm funding the court case will have the right to take 25 per cent of any money won back.
But Massey University banking expert David Tripe questioned whether the claimable amount was overblown.
"The figures are a bit of guesswork. I would be surprised if there was a billion dollars that was claimable."
He said when banks charged exception fees it wasn't just to cover the cost of the transaction but also to cover the increased risk of the money going out and warned if there were no fees there would be little incentive for people to manage their accounts well.
"Otherwise people would attempt to make payments when they do not have the money to do so."
The chief executive of the Federation of Family Budgeting, Raewyn Fox, said they heard from many families over the year who had problems with bank fees.
"Usually there's a spiral effect. If one [payment] bounces, probably a whole lot are going to bounce and then there are going to be a whole lot of fees. So when it happens it's usually not just $15.
"It can be $100 or more - which can be quite big for people that are coping fairly close to the wind, financially, anyway," she said.
Commercial litigation lawyer Tim Rainey said it would be difficult for the class action to get off the ground, given legal proceedings in New Zealand did not properly provide for such claims. But if it were successful, it would set a huge precedent.
