Paciocco v ANZ Banking Group Ltd [2015] FCAFC 50: Bank Wins Appeal on Credit Card Late Payment Fees

Thursday 9 April 2015 @ 9.52 a.m. | Corporate & Regulatory | Trade & Commerce

In Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50, handed down yesterday (8 April 2015), the Full Court of the Federal Court has overturned the decision of Justice Gordon in the earlier case of Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35 (5 February 2014) which had held that the "credit card late payment fees" charged by the Australia and New Zealand Banking Group Limited (the ANZ) were illegal - allowing the ANZ's appeal.

The Basic Issues

The initial proceedings were initiated by Mr Lucio Paciocco and a company controlled by him, Speedy Development Group Pty Ltd, and this was a representative proceeding made under the Federal Court of Australia Act 1976 (Cth) Part IVA. The initial proceedings sought to have set aside bank fees charged by the ANZ on various grounds.

The attack on the fees was made on the basis that:

  • they were either penalties at common law or equity; or
  • were the product of unconscionable conduct by the ANZ within the meaning of the:
    • Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) sections 12CB and 12CC (relating to unconscionable conduct in connection with financial services), or
    • the Fair Trading Act 1999 (Vic) (the FT Act),sections 8 and 8A (repealed-see now Australian Consumer Law and Fair Trading Act 2012); or
    • were unjust under the National Credit Code in Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth); or
  • were unfair contract terms under the FT Act, section 32W and the ASIC Act, section 12BG.

The Full Court's Decision

Chief Justice Allsop delivered the main judgment allowing ANZ’s appeal and stating the key findings as to why the transactions were not unjust and the terms were not unfair at paragraphs [352] to [365] of his reasons. Of particular note are the points at paragraphs [364] and [365] where his honour appears to stress that the determination of the "unjustness and unfairness" of a fee is a matter to be evaluated and that while the "size of a fee may help the evaluation it does not determine it".

[364]The characterisation of unjustness or unfairness is, of course, evaluative and a task to be carried out with a close attendance to the statutory provisions. The reasons at [358]-[360] attend to the relevant considerations in ss 32W and 32X of the FT Act and s 76 of the National Credit Code. The introduction of a consideration of the nature of the assumption alters the considerations involved, but not the overall evaluation. The most important change to the analysis would be the recognition that the size of the fees was not necessary for the protection of the interests of ANZ: s 76(2)(e) of the National Credit Code.

[365] Neither the relevant provisions of the FT Act nor of the National Credit Code exhibit the intention that the Court should assume the role of a price regulator. It is unjustness or unfairness of transactions or terms that is required to be demonstrated. Price may affect such an evaluation but it does not determine it. In all the circumstances, in particular those discussed at [308], [343] - [347] and [358] – [360] above, I do not consider the transactions to have been unjust or the terms unfair.

The Class Action - What Next?

Legal firm Maurice Blackburn, the firm behind the representative action who represents 43,500 ANZ customers in the matter, is reported by the ABC News as stating that it would seek leave to appeal to the High Court. The ABC report quotes the firm's national head of class actions, Mr Andrew Watson as saying:

"It is perhaps appropriate that Australia's largest consumer class action will ultimately be decided by Australia's highest court, and as a result of today's decision, that's where we're headed, . . ."

Criticising the result, Mr Watson is further reported as saying:

"Unfortunately, the decision today runs the risk of turning the doctrine of penalties and the statutory provisions on which we relied, into empty vessels devoid of any practical or meaningful content and significantly reducing the protection for all consumers in Australia."

The late fees component of the class action, now ruled to be legal by the Federal Court, is reported to represent about a quarter of the total $57 million in fees that lawyers were trying to recoup for customers from the various financial institutions - the action against ANZ being only one of a number planned. Other fees, such as "honour and dishonour fees", and "over-limit fees on credit cards" were also targets of the class action which had been found to be legal in the initial action and were reaffirmed to be so in yesterdays appeal.

The ANZ Bank is reported to have responded to the decision by stating that the bank

". . . hoped Wednesday's ruling put an end to the long-running litigation,...  Our long standing position has been these fees were lawful and we're pleased this has been vindicated by the Full Federal Court, ... We were particularly pleased the Court found there was no dishonesty on ANZ's part and these avoidable fees were fairly and fully disclosed and there was no lack of good faith by ANZ".

As already mentioned, the case against ANZ was viewed as a test case for other class action against several of the biggest banks including the Commonwealth Bank, Westpac and National Australia Bank. A classs action which is reported as having 180,000 customers signed up to it, supposedly the biggest in Australian history.

Further, the types of fees involved are not only charged by banks and  financial institutions but are also common among Telcos and other similar business who will also take interest in this case. It will make for an interesting sequel if, as Maurice Blackburn has indicated, the matter gets to the High Court.

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