SMH.com.au
THE $5 billion class action that is building over bank ''penalty'' fees may take many years to resolve. And if it is won, the account holders signing up at the rate of a ''thousand an hour'' may be greatly disappointed with the cheque they get in the post, but that's not the point.
This move by law firm Maurice Blackburn backed by litigation financier IMF Australia to take on 12 banks has the power to change the way banks behave, regardless of what happens in court.
Consumer class actions - as opposed to shareholder class actions - force large, aggressive organisations to change their ways.
News that National Australia Bank has been overcharging 30,000 customers on the fees in question only accelerates reform.
More than a decade ago I wrote a book (My Mother's Diamonds, 1998) on the Australian dimension of what was then the world's biggest class action. The case concerned the battle to recover cash from bank accounts and other property looted from Jewish families in the Nazi era. One of the first victories in that campaign was a $2 billion settlement against Swiss banks, which were then notorious for ''secret'' accounts .
Swiss banks were never the same after that first class action and ''suspected'' accounts are regularly opened to authorities. A fortnight ago in its annual results, UBS (a big player in Australian markets) agreed to hand over Swiss account details of more than 4000 suspected American tax dodgers to US authorities.
On the more commonplace issue of proving whether Australian banks have been gouging fees, we can expect defensive arguments that items such as special fees on overdrawn bank accounts, credit card accounts and dishonoured cheques are not penalties but service charges.
Needless to say the parties concerned are already rushing to mould public opinion. With $6 billion under question, it's not easy to find an independent voice.
But I asked Nicole Rich, the policy director of the Consumer Action Law Centre, what the precedents were here.
She notes two outstanding victories in legal history where the High Court judged the existence of fees that punished consumers with exorbitant fees to be unlawful. The cases relate to finance companies AMEV-UDC and Austin (in 1986) and O'Dea and All States Leasing (in 1983).
In both cases the penalty fees were shown to be disproportionate to the actual costs imposed - this is the heart of the arguments against the banks today.
Weighing against victory would be a big action in the British Supreme Court in 2009 where the Office of Fair Trading took a group of seven ''high street banks'' to court over unfair fees. The case received huge attention in the British media, though the OFT lost the action.
Separately, there was a notable - if minor - case in South Australia in recent times when the Police Credit Union found itself facing charges it was imposing disproportionate penalties. In this instance the case also failed. However, in South Australia the issue turned on the litigant not being able to prove the case.
You'd have to say Maurice Blackburn backed by IMF money and tens of thousands of customers in the High Court will have more resources to prove its case.
For the majority of disgruntled account holders, there appears to be little to lose - if the action does not succeed, it costs you nothing; if it is a win, 25 per cent will go to the lawyers - that is standard practice. If you can't wait so long, don't forget that you can negotiate the return of fees you deem to be unfair with banks individually, and there are many examples where customers have won money back when they were unfairly charged.
To make it easier you can use a template letter available free from choice.com.au - and if you win you won't have to share your winnings with anyone.
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