Bank customers revolt!

The days of shelling out big bucks in fees for bounced cheques and overdrawn accounts may be numbered.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The days of shelling out big bucks in fees for bounced cheques and overdrawn accounts may be numbered if New Zealand banking customers have their way. Australian consumer law firm Slater & Gordon, in conjunction with Sydney-based Litigation Lending Services and New Zealand barrister Andrew Hooker, yesterday announced an $800 million class action suit against New Zealand-based banks, including Australia's 'big-four'; National Australia Bank (ASX: NAB), Commonwealth Bank (ASX: CBA), Westpac (ASX: WBC), and ANZ (ASX: ANZ), as well as New Zealand government-owned Kiwibank.

The suit, titled '"Fair Play on Fees" claims fees charged by the banks in New Zealand over the past six years are excessive and do not reflect the cost of customers defaulting on their obligations for things like overdrawn accounts, late payments on credit cards, or bounced cheques. It is thought up to one million Kiwis will be eligible to take part in the suit. Investors appeared to take the news in stride with three of the four Australian-owned bank shares closing higher yesterday.

While not insignificant, the total amount attributable to each individual bank could be comparatively small. The largest of the four, for example, Commonwealth Bank, announced a first half profit of $3.78 billion in February, with CBA's New Zealand brand ASB brining in NZ$348 (AU$279) million, up 7% on the prior year.  NAB recorded a full year profit of $4.98 billion in 2012, and December quarter earnings for 2013 of $1.45 billion.  However if successful the suit would require the banks to re-price such fees going forward, which may have a subtle impact on long-term earnings and may set a precedent for legal cases in other countries.

The impact of the legal action will still pale in comparison to the mammoth compensation paid out by BP (NYSE: BP). In the wake of the 2010 Deepwater Horizon disaster, BP has made more than US$32.8 billion in payments directly related to the accident and oil-spill, while profit for 2012 was US$11.5 billion according to the company's 2012 financial summary.

Foolish takeaway

Shares in Australia's big-four banks have been on a rocket trajectory since about November last year, many of which are flirting with all-time highs.  The class action being filed in New Zealand may be a timely reminder for investors that the apparent golden-geese of the ASX are not riskless.

The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Regan Pearson doesn't own shares in any companies mentioned in this article.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »