Bank fee lawsuit - should you sign up?
The bank lawsuit of the century is on, and New Zealanders like you are being asked to sign up to it.
But should you?
Backed by Australian litigation funders, Auckland lawyer Andrew Hooker hopes to prove in court that the $15 and $20 dishonour fees charged to bank customers for not having the funds to honour a payment or cheque, or for paying their credit card bills late, are illegal.
It's a big deal, as the dishonour fees earn the big banks tens of millions of dollars a year.
The action Hooker is planning is what's called a "representative" action, where one named plaintiff is used to take a test case.
It is called representative because that one named plaintiff represents the thousands of other people who have signed up to the legal action- more than 20,000 have registered at fairplayonfees.co.nz so far.
If the case succeeds, the bank which charged the named plaintiff the dishonour fees will have to compensation.
And because it is what's called a class action, all those the named plaintiff represented- all the other people who have signed up to the action- will have to be paid compensation too.
But to make the action financially viable, including to cover profits hoped for by the litigation funders, enough people need to register so that a win yields more in compensation than the $3.5 million estimated cost of taking the case.
If too few sign up the funders can pull out, and it's game over.
So should you sign up?
If you are the kind of person who manages money well, and has never paid a dishonour fee, then the answer is clearly 'Why would you bother?' as you have nothing to gain.
For those who have racked up a few dishonour fees, signing up brings the possibility of getting paid some portion of them back.
Just how much of each $15 or $20 dishonour fee that a win would yield is unknown.
It depends on how many people sign up, and how many dishonour fees they have paid, and what portion judges decide was illegal.
And any payment to those signing up will come after the litigation funders get paid.
If you have paid a couple of dishonour fees, the sum that may one day, years from now, come to you, is not going to be life-changing.
For those who have paid multiple dishonour fees, signing up will seem more attractive, and Hooker says some poorer people have paid hundreds of dollars annually for years.
But signing up to a legal action of this scale is no small thing, and registering requires accepting the terms of the litigation funding and legal services agreements that govern the whole lawsuit.
Usually people don't sign up to complex legal contracts by clicking a button online. Sensibly so. Usually complex contracts require lawyers to explain them.
Hooker says that those signing up are indemnified by the litigation funders for any and all costs, even if the case fails.
It's a win-win. If the case succeeds, you get money. If it fails, you pay nothing.
I've read the litigation funding document. It seems to say that.
But people will have to decide for themselves whether they are convinced that is so, and whether there is any personal risk in helping ensure the banks have to justify their horrific, poverty-exacerbating fees in court.
- Don't sign anything you don't fully understand
- Remember, lawyers always get paid first
- The only fights worth joining are the ones you believe in
Rob Stock is a journalist with the Fairfax Business Bureau and money editor of Sunday Star-Times.