Mrs Sedlaczek, a customer of Police Credit Union in South Australia, was infuriated when the financial institution charged her $17.50 for overdrawing her no-credit-limit transaction account, and demanded it return her money. When the credit union refused, she took them to court.

Using information obtained from the website Bank Beaters, Mrs Sedlaczek charged that Police Credit Union’s exception fees:

•    Constituted penalties under common law;
•    That charging such fees was “unconscionable conduct” under the ASIC and SA’s Fair Trading Act; and
•    It also constituted deceptive and misleading conduct.

But in a recent and comprehensive written ruling by SA’s deputy chief magistrate, Andrew Cannon, delivered after considering the facts for four months, the Magistrate’s Court found against Mrs Sedlaczek. The ruling could influence similar deliberations in other jurisdictions.

In his ruling, the magistrate decided that the fees charged were not deceptive, as the credit union’s terms and conditions were clearly posted, readily available, and easily understood. Although those terms and conditions were not negotiable, banking customers did have the option of taking their business where they chose rather than complying with them. Additionally, the magistrate ruled that Mrs Sedlaczek had not proven the exception fees were so disproportionate to the costs incurred by the credit union through her breach of the terms and conditions that they could be called penalties.

The magistrate seemed to consider the final point important, for he emphasized that should exception fees be truly out of all proportion to the costs incurred, “then clearly they would be a penalty.”

This gains added significance from the fact that Australia’s four largest banks have all recently reduced and even eliminated their exception fees—seemingly just in time.

Previously such fees could run $30 or even higher. But with the initiation of their new regimes, most of those fees have lowered considerably. For example, NAB on 22 January will eliminate most of their exception fees, and the only one remaining, for late payment on a credit card account, will be reduced to $5. In December, ANZ will also lower their account fees to $6 and those for credit cards to $20.

Westpac has already lowered their fees for both transaction and credit card accounts to $9, and Commonwealth Bank has reduced theirs on transaction accounts to $6 and $10, and those for credit cards to $25.

Source: thesheet.com