A billion-dollar lawsuit against New Zealand's banks could have an impact on their bottom line profits but the banks' lobby group says it has doubts over the claim gaining traction.
Auckland barrister Andrew Hooker, backed by Australian law firm Slater & Gordon and Australian litigation funders Litigation Lending Services, yesterday announced plans to take on the main banks to claim back "excessive" default fees paid over the past six years.
Hooker said all New Zealand banks were in its sights but it would primarily target the large Australian-owned banks ANZ, ASB, BNZ and Westpac as well as state-owned Kiwibank.
"No one is off the hook."
A similar case in Australia has targeted 12 banks including the big four, with the ANZ the first case to be pursued in court, he said.
The Australian legal action has been going since May 2010.
Hooker said an important win against the ANZ came in November when the High Court of Australia ruled that unfair bank fees could be considered penalties. The case is headed back to the Federal Court.
Kirk Hope, chief executive of the New Zealand Bankers Association, said the banks would take the claim seriously and would have to provision for the cost.
But he said the legal action did not appear to take into account the differences between New Zealand and Australian law.
"There isn't such a thing as a class action in New Zealand."
He said another firm called Wakefield had tried to take a similar case a few years ago but pulled out of the action.
Hope said three out of the four fees being targeted under the lawsuit were already regulated by the Commerce Commission.
"They [Commerce Commission] have previously taken action against the banks. If they think there are issues they will certainly look at them."
Hope also questioned the motivation behind the action and said New Zealanders appeared to be happy with their banks.
"Last year Consumer New Zealand did a survey and found bank satisfaction levels at 92 per cent. If there are issues around fees I would have thought they would come up through that process."
Hope said banks were willing to work with their customers on fees and if customers were not happy they could just switch to another bank.
"We know the sector is pretty highly competitive."
New Zealand banks had a combined net profit of $16.4 billion in the past six years but Hope said non-interest income earned by the banks had been declining in recent years.
The group has estimated up to one million Kiwis may be eligible to take part in the action. Around 85 per cent would be individual customers while a further 15 per cent would be small business owners.
Michael Barnett, chief executive of the Auckland Chamber of Commerce said the class action would definitely be attractive to small business owners. He said a lot would have used their credit cards just to keep going and would have suffered the costs of doing so.
Fees being targeted
*Honour fees charged when there are insufficient funds in an account to meet a direct debit payment. The bank pays the money but then charges a fee.
*Honour fees charged when a cheque bounces.
*Dishonour fees where a person is charged for going into overdraft which has not been previously arranged with the bank.
*Late payment fees on a credit card.