Yesterday, the Full Federal Court overruled the landmark decision by Justice Gordon in the case ofPaciocco v Australia and New Zealand Banking Group Ltd (2014) 309 ALR 249, finding that ANZ’s late credit card payment fees are not illegal penalties. Paciocco v ANZ was the first federal court case to consider the High Court’s reasoning in Andrews v ANZ.

Justice Gordon ruled in February 2014 that ANZ's $20-35 fees on late credit card payments were extravagant, exorbitant and unconscionable. She found that the quantum of fees were far in excess of the true cost to the bank which was estimated to be between $0.50 and $5.50 (depending on the specific fee). Accordingly, Justice Gordon found that Paciocco was entitled to recover from ANZ the amount of the fee that was in excess of this. Our full alert on this case is located here.

However, the Full Federal Court yesterday disagreed with Justice Gordon’s reasoning and overturned her decision that the late payment fees constitute an illegal penalty.

The Full Federal Court did, however, uphold Justice Gordon’s decision that four other bank exceptional fees - honour, dishonour, over-limit and non-payment fees – are not illegal.

It has been reported by various media outlets that Paciocco will seek leave to appeal the decision to the High Court.

This decision will have a substantial impact on the interpretation of the doctrine of penalties and the law of liquidated damages, leading to further confusion in an already muddled landscape. From this decision, it is unclear as to how the principles from Andrews v ANZ will be applied in future penalties cases.

For more information on this decision please read our more detailed article here.