Australia's banks have been ripping hundreds of millions of dollars off their customers in penalty fees that have little or no legal basis.
See Michael Pascoe in action in the video player
A potential class action against the penalty fees was dropped last year because of the high cost of taking on the banks. With hundreds of millions of dollars in profits at stake, the banks inevitably would fight any class action. A lawyer involved has told Seven News just the discovery process to get the necessary documents out of the bank would cost $5 million - more than the firm could afford to risk on such a case.
But if Australian consumers follow the pattern set by their UK counterparts, they could start demanding the repayment of those penalties anyway.
"We believe bank customers paid £4.7 billion in unauthorised overdraft charges last year alone - many have already claimed back some or all of this money, with awards ranging from £70 to thousands of pounds," said Helen Ainsworth, of the British consumer group Which?.
What should really stick in the craw of Australian bank victims though is that a consumer affairs lawyer tried to blow the whistle on these dubious fees in December 2004, but the banks effectively stared down the challenge and continued on their very expensive way.
Seven Sunrise producer Paul Richards linked the British experience (explained by the Belfast Telegraph and in an article by the Independent) with a study by Nicole Rich, supervising solicitor at Victoria's Consumer Law Centre.
Ms Rich's "Unfair fees: A report into penalty fees charged by Australian banks" is a detailed examination of the whole issue, including how the bank penalty payments tend to hurt poorer customers the most. You can read the whole document here but the legal core of the argument is in these two paragraphs:
"In Australia, it is a well established legal principle that a contractual term which requires one party to a contract to pay the other 'innocent' party a sum of money upon a default or break of the contract is enforceable only if it provides for payment of a sum of money that is a genuine pre-estimate of the loss or damage suffered by the innocent party. This is sometimes called a 'liquidated damages' term.
"However, such a term is to be distinguished from a 'penalty' term, which seeks to not compensate the innocent party but to penalise the other party for the break or default. Penalty terms are unenforceable at law."
That argument has effectively been confirmed by the Office of Fair Trading - the British equivalent of the Australian Competition and Consumer Commission. The OFT ruled last April that credit card penalty fees were illegal and it's currently investigating other bank penalty fees as well.
The Australian Bankers Association's response to Nicole Rich's serious allegations boils down to saying that penalty fees are not illegal and that they are clearly disclosed to customers.
But both those points strike me as irrelevant - a smokescreen to avoid the real issue. It's not alleged that the penalty fees are "illegal", it's just that they can't be legally enforced. For example, it's not illegal for me to tell everyone reading this story to send me $50 - I just have no legal means of enforcing that request. The banks have been bluffing customers into paying penalty fees.
And as for the disclosure argument, one of the British consumer web sites gives the example that if someone tells you they are going to punch you in the head, it does not make it legal for them to subsequently hit you.
From a consumer's point of view, the immediate thing to do is to resist the banks' pressure to pay their highly dubious fees.
If you miss the repayment date on your credit card, for example, and cop a $30 "late fee" on top of the interest charges (as someone in my family did over the holidays) make a payment immediately and then ring the bank to complain about the unreasonableness of the fee.
A half-smart bank will scrap the fee. If they don't, well, how would you like to be a test case for the legality of such fees in the Small Claims Tribunal?