ANZ Banking Group Ltd. partially lost a class action law suit in the Australian Federal Court brought by more than 43,000 customers who claimed they had been charged excessive fees for years. In some cases the fees were 70 times the cost to the bank of administering late payments.
Justice Michelle Gordon ruled that the bank had been illegally imposing penalties for late payments on credit cards.
She agreed with lead plaintiff Lucio Paciocco's argument that the fees were "extravagant, exorbitant and unconscionable," and represented a breach of contract.
But she also ruled in ANZ's favour by dismissing claims that other types of bank fees were illegal penalties.
It was not clear how much the bank would have to pay back customers who had been charged too much over six years. Lawyers for the bank and customers have until next week to agree on a proposal for repaying customers that the court can rule on.
ANZ chief executive Philip Chronican said he was still reviewing the judgment, and its implications were unclear.
"We felt it was a fair fee at the time," Chronican told reporters. "We are now getting a different perspective on that as a result of what the courts have determined."
He said that in 2009 his bank reduced a number of fees it charged and abolished another 27 fees.
While the credit card fees were illegal, Chronican welcomed the court's ruling that another four fee types that had been challenged by the suit were legal. Maurice Blackburn, the law firm representing the customers, had claimed 57 million Australian dollars ($51 million) in damages from all five fee types.
Maurice Blackburn said the ruling changed the banking landscape in Australia.
The case was the first of eight planned class action law suits involving 185,300 customers of Australian banks, claiming AU$243 million ($216 million) in damages.
The court found ANZ late fees on credit cards ranged from AU$20 to AU$35. The actual cost of administering such late payments was mostly 50 AU cents and sometimes up to AU$5.50.
James Middleweek, investment manager at Bentham IMF which funded the class action, said ANZ will have to repay customers the difference plus interest.
Melbourne Law School lecturer Katy Barnett said she expected ANZ's liability would be more than AU$12 million ($11 million). She also expected other banks would also repay customers if their credit card contracts contained similar late fee clauses.
She said many companies that charge customers late fees had nervously awaited Wednesday's ruling, which would have come as a relief to many as most of ANZ's fees proved to be legal.
The Australian Banking Association, which represents the banking industry, declined to comment.