Not out of proportion: ANZ late payment fees not penalties

Handing down its decision in Paciocco v ANZ [2016] HCA 28 (Paciocco v ANZ), the High Court of Australia has determined late payment fees charged by banks on consumer credit card accounts are not penalties.

The decision not only affects banking contracts, but all contracts, including construction and other forms of consumer contracts, such as those with utilities and telecommunications providers.

Key points

The High Court has re-affirmed the "out of all proportion" test as the overriding test to determine whether a stipulation requiring the payment of money to secure a party's performance of a contractual obligation is unenforceable as a penalty. Where the monetary amount is out of all proportion, it will be deemed a penalty and the claimant will be left to rely on damages at law.