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
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