A High Court challenge starting today in Canberra will determine whether bank customers should be reimbursed hundreds of millions of dollars in credit card late-payment fees.

Thousands of ANZ customers are part of a class action hoping to convince the High Court the fees are illegal.

At the crux of the challenge is the disparity between late fees charged by the bank, and the actual loss suffered when a customer pays a credit card late.

Customers say the late fees they were charged by the bank (up to $35) bear no relationship to the actual cost to the bank, which they say is about 50 cents.

The class action attack on the fees is that they are:

1. penalties at common law or equity; or

2. the result of unconscionable conduct by ANZ within the meaning of the Australian Securities and Investments Commission Act 2001 (Cth) or the Fair Trading Act 1999 (Vic); or

3. unjust under the National Consumer Creditor Protection Act 2009 (Cth); or

4. unfair contract terms.

Initially, the Federal Court ruled in favour of the customers, finding the late payment fees unlawful as they were extravagant, exorbitant and unconscionable. However, that judgment was overturned by a full bench of the Federal Court, which took into account a broader scope of items that could be considered costs to the bank. This has prompted the High Court action.

This case is one of several class actions against the big banks, including CBA, Westpac, NAB, Citibank, St George and Bank West – these cases are now waiting on the outcome of the High Court appeal.

If the High Court appeal succeeds, anyone forced to pay a late fee could benefit from the Court’s decision.