‘Penalty’ fees case – win for Credit Union

On 12 October 2009 the Magistrates Court of South Australia delivered a judgment in favour of Police Credit Union (South Australia) in a case relating to fees which were alleged to be ‘penalties’ – Sedlaczek v Police Credit Union Ltd.  Langes+ acted for the credit union in relation to the matter.

Facts

Between 1998 and 2007 the plaintiff operated a deposit account with the credit union. The account had no credit facility attached to it. The account terms provided that the plaintiff should not overdraw the account, but if the credit union chose to honour transactions by the plaintiff which overdrew the account, such as direct debits and cheques, then it would charge the plaintiff a fee. The credit union charged such fees on 26 occasions over a period of almost 6 years. They amounted to $455.00 in total. On each occasion the credit union sent the plaintiff a letter advising her that a fee had been charged.

The claim

Some time after closing the account the plaintiff contacted ‘Bankbeaters’, in response to publicity suggesting that fees of this type could be recovered from financial institutions, and she later commenced legal proceedings against the credit union. She claimed that she was entitled to recover the fees because:

• They were not properly chargeable under the terms of the contract;
• They were ‘penalties’ at common law;
• The charging of the fees was unconscionable conduct under section 57 of the Fair Trading Act 1987 (SA) and sections 12CA, 12CB and 12CC of the ASIC Act 2001 (C’th); and
• The charging of the fees amounted to misleading and deceptive conduct.

The decision

Deputy Chief Magistrate Dr Andrew Cannon rejected all these claims.

In relation to the claim that the fees were penalties, His Honour found that, while the fees were imposed for breach of contract, the plaintiff had failed to prove that the fees were so disproportionate to the actual costs incurred by the credit union as a consequence of the breaches as to amount to penalties.

His Honour also found that while the account terms were not negotiable and were unilaterally imposed by the credit union, there was no pressure upon the plaintiff to choose the credit union as her banker instead of other institutions.  She chose the credit union. Its contract terms and fee structures were made known to the plaintiff and were ‘available and quite easy to understand’.  His Honour went on to say that the credit union had ‘acted consistently … in a principled way’.

For more information or for advice on responding to similar claims contact Shannon Adams, Partner, on 08.8168.9601