Slow progress of Class Actions Bill may stymie exception fee case against banks

A Christchurch law firm’s ambitions to take on New Zealand’s Australian owned banks on behalf of some customers disgruntled with penalty and late fees, could be stymied by the Government’s lack of urgency in pushing through legislation enabling class action law suits.

Wakefield Associates revealed plans in May to follow the lead of litigation funder IMF Australia, which launched a A$5 billion exception fee class action suit against 12 banks on behalf of disgruntled customers across the Tasman, in New Zealand.

Wakefield Associates’ Garry Wakefield told interest.co.nz his firm still hoped to file proceedings in New Zealand against ASB, ANZ, BNZ, the National Bank and Westpac before year’s end.

The proposed case over exception fees, or avoidable penalty and late fees charged in circumstances such as when customers are overdrawn on the available limit in their account, are late in repaying their account or overdraw on credit cards, had attracted interest from “hundreds” of bank customers without Wakefield Associates yet soliciting it.

Wakefield said there were both individuals and litigation funders including IMF Australia interested in bank rolling the case in return for a slice of any compensation awarded by the courts.

However, proceedings may not be filed unless the government approves legislation to enable class actions. A draft Class Actions Bill and proposed changes to High Court Rules have been languishing with the Ministry of Justice for a year. They haven’t been progressed due to other government priorities, according to the Ministry of Justice.

However, Brent Webling, a spokesman for Justice Minister Simon Power, said the Government would consider and progress the proposed bill as other priorities allow.

“(But) I don't have a timetable for that.”

Without specific legislation Wakefield said the action against the banks might not go ahead.

“It would be more likely to go ahead if there was the law change,” he said.

“If we had the amendments to the High Court rules and the Class Action Bill being passed, the amendment to the Judicature Act, it would make these proceedings so much better, easier and more efficient before the courts,” Wakefield added.

“They’d be better managed and there’d be less uncertainty and less cost.”

Without the legislative changes the case could go ahead but would take the form of a representative action, and be a lot harder to pursue, he added. A representative action would mean bank customers would have to sign up individually with a law firm or litigation funder. Wakefield said if someone didn’t know the action was being taken and that there was a cut off date they had to sign up by, they would miss out.

However, under the proposed class action legislation, a litigant merely requires seven people’s support to bring proceedings.

“The court then controls the litigation. It becomes a class action in the sense that anyone who has suffered loss and meets that criteria becomes eligible to benefit from the litigation.,” Wakefield said.

When news of the massive Australian class action lawsuit broke in May, the New Zealand Bankers' Association (NZBA) released a statement on behalf of its members - ANZ, ASB, BNZ, Citibank, HSBC, Kiwibank, the National Bank, Rabobank, TSB and Westpac. It noted that in respect to fees New Zealand has a different legislative framework to Australia. The Credit Contracts and Consumer Finance Act provides strong protection to New Zealand banking customers, NZBA chief executive Sarah Mehrtens said.

Mehrtens added that the combination of fees and interest rates customers paid are "fair and reasonable."

Meanwhile, the Commerce Commission has been investigating the “unreasonableness” of credit card exception fees. It warned credit card providers in May not to charge customers late payment fees of more than NZ$15.

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