A law firm has urged small businesses to sign up to a class action lawsuit against 12 of Australia’s major banks who have allegedly gouged billions of dollars from customers in so-called exception fees such as for dishonour and late fees.
Financial Redress, a subsidiary of litigation funder IMF, is preparing to set up the action, claiming 12 banks have illegally charged customers over $5 billion during the past six years.
The firm has said it hopes to regain as much as the $5 billion as it can, but that figure depends on how many entities are involved in the lawsuit. If between 300-400,000 people sign up, it has said, the lawsuit could reach well into the hundreds of millions.
Bernard Murphy, chairman of Maurice Blackburn Lawyers, the firm that will run the legal action, has said there are already 3,000 registrations on the Financial Redress website, and urges small businesses to consider signing up.
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“Get involved if you would like to. It’s fairly easy to follow on the Financial Redress website and sign on, there is a list of frequently asked questions as well, and there will be no cost to the business unless the case is successful, when a fee will be issued for the litigation.”
While an estimate has been made that businesses could receive an average payout of $5,000, Murphy says there is no way of knowing a specific payout figure until the amount of members in the class-action has been finalised.
The banks involved in the case as defendants are ANZ, Bank of Queensland, Bank of South Australia, BankWest, Bendigo Bank, CityBank, Commonwealth Bank, HSBC, National Australia Bank, St George, Suncorp and Westpac.
The lawsuit refers to situations where a business or individual may overdraw their account on a credit card, breaching their contract with the bank. The bank is entitled to a “genuine pre-estimate” of the cost due to the overdraw.
However, Murphy says that while this estimate should be in the range of $2, banks have been charging between $25-$60 instead.
“These businesses have suffered losses, and these banks have been charging extravagant fees for a long time. There is a lack of fairness in charging a business more than $25-$60 for these fees when the payment for the balance is made up a couple of days later.”
“The types of fees in the range of $25-$60 bear actual no relationship to the cost to the bank, because the cost of making a credit card payment late is certainly no more than a dollar or two.”
Murphy says the case will be funded by IMF on a “no-win no-fee” basis, meaning businesses involved in the case will not have to pay a fee if it is lost. If the case is won, however, a legal fee will be charged.
“If the case is successful, they will pay 25% of their losses to the litigation. The case is large and expensive, and IMF is taking on substantial risk by having a no-win no-fee provision.”