Banks charge interest rate of up to 14,000% 'for exceeding overdraft'
Banks charge interest rate of up to 14,000% 'for exceeding overdraft'
Banks are charging interest rates of up to 14,000 per cent when people go overdrawn.
Some banks have been charging an annualised interest rate of up to 14,000 per cent to people who exceed their overdraft limit.
Your Money - part of News.com has found that the cost to the banks for someone going overdrawn can be just cents.
But a customer could be charged $40 if he goes over his limit by $100, for example, leading to a large payment on top of the debt.
More than 85,000 Australians have pledged to group together and take action against the organisations, with a case set to begin next month to try to get some of their money back.
Ben Slade, of case lawyers Maurice Blackburn, said it is all up to the courts and whether they believe the fees are penalties for exceeding a bank account, or if they are for the organisations' service of having to deal with the extra debt.
He added: "The courts in Australia have determined that any pre-estimate of financial damages to the bank (the size of the exception fee) must be a fair estimate of damage and not an exorbitant or extravagant fee."
It is believed the banks have earned around $5 billion in the last six years thanks to the charges, which include a late fee for people who do not pay off their credit card in time and a charge for any cheques that bounce.
The action is set to target a range of organisations, including ANZ, Commonwealth Bank of Australia, Bank of Queensland and HSBC among others.
This news comes after Nicole Pedersen-McKinnon, writing for the Sydney Morning Herald, predicted that many Aussies who have joined the class action lawsuit will call the fees illegal.
She noted: "It can't have been happy news for the banks, which saw their share prices dip on the revelation; they must be concerned about the implications if they lose."