The class action against the ANZ bank could blow out to a string of financial institutions, a lead lawyer in the case says.
The $57 million class action against ANZ Bank could turn into a multibillion-dollar claim against the nation's banks.
The three week Federal Court hearing involving 43,500 ANZ customers must decide whether the bank's fees of $25-$45 for over limit, late payment and other issues were illegal and unconscionable penalties disproportionate to its actual costs.
The ANZ case, which began on Monday, is the first of eight planned class actions involving 185,300 members of eight lenders claiming $243 million.
However, the lawyers leading Australia's largest ever consumer class action say the nation's banks had collected about $5 billion in such fees over six years before public pressure led NAB to start a drop in fees in 2009.
If the court found that the fees were illegal penalties, then that could potentially apply to not just the class action participants but potentially millions of bank customers hit by years of fees, law firm Maurice Blackburn's class action head Andrew Watson told reporters before the start of the hearing.
"That is a huge issue that will constitute a precedent not just for the banks that we've used but for other financial institutions who are levying similar fees and exceptions charges."
The class action would also set precedents for other industries, although Mr Watson said the firm was currently only focused on the banks and confident it had a strong case.
ANZ is currently only saying publicly that it will vigorously defend the case, arguing it is entitled to impose the fees on customers but will not provide a running commentary.
However, the fact that NAB no longer imposed such fees and ANZ only charged about $6 due to consumer pressure would make it hard to now justify the previous fees, said class action funder IMF's investment manager James Middleweek.
He said while the fees had been reduced, many banks were still over-charging customers now, three years since the class action was first launched.
For example, customers that had credit cards taken out before last year paid over-limit fees of up to $40 despite the fact new laws had banned those fees, he said.
The primary argument before Justice Michelle Gordon to decide who wins is whether or not the banks' fees can be called penalties.
Mr Watson said contract and fair trading laws did not allow a party such as a bank to impose a penalty, but only a fair fee amount.
ANZ posted a record $6.5 billion cash profit for the year to September 30.