ANZ late payment fees upheld
The recent High Court decision in Paciocco v Australia and New Zealand Banking Group Ltd  HCA 28 provides guidance to parties around the circumstances in which provisions in a contract will be found to be a penalty. Generally if a provision is a penalty it is unenforceable at law.
Customers of ANZ challenged a late payment fee, which was charged when customers made their standard minimum monthly payment after the due date. Customers argued this late payment fee was unenforceable as a penalty and that the fees charged were unjust transactions under the relevant legislation and therefore ANZ engaged in unconscionable conduct under such legislation.
By a 4-1 majority decision the High Court dismissed the appeal and found that the fee was not a penalty and was not unconscionable, unfair or unjust under the relevant legislation.
The High Court held that the most appropriate test in determining whether a fee is a penalty is what relevant interests have been impacted by the entity trying to uphold the fees. In this case the fee was protecting ANZ’s legitimate commercial interests (such as regulatory capital costs and operational costs) that were affected when customers made their monthly payment late. Accordingly, as the costs of ANZ’s relevant commercial interests were actually greater than the late fees imposed, the late fees were found not to be a penalty.
Whilst the High Court decision deals specifically with a late payment fee for a credit card account, it will have a widespread effect on a range of commercial contracts.
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