Consumers need more protection, with banks to continue their "fee frenzy" after Australia's highest court backed the ANZ over late payment fees, consumer groups say.
The High Court dismissed a six-year class action by ANZ customers who argued the bank charged excessive fees for late payments on credit cards.
Consumer Action Law Centre CEO Gerard Brody said the decision allows the banks to continue charging exorbitant penalty fees and the government needs to act.
"The fees charged by banks and other businesses need to actually reflect the cost and not be used to add to their bottom line," Mr Brody said.
"Late credit card fees as high as $35 are ridiculous and bear no resemblance to what a late payment actually costs a bank."
Choice CEO Alan Kirkland said the banks were charging out-of-proportion fees and posting record profits.
"This disappointing decision shows that our laws are not able to protect consumers from the powerful banking sector," he said.
"With this decision, we expect the banks to continue their fee frenzy."
The average household pays about $468 a year in bank fees, or $9 a week.
The law firm that took the ANZ case to the High Court and has similar class actions against the other major banks has also called for law reform.
Maurice Blackburn national head of class actions Andrew Watson said the ruling meant banking customers had no effective means to challenge bank fees which bear no relationship to their real costs.
"The law should recognise the reality of the banking transaction which is that customers ought not to be levied fees which bear no relationship to actual costs," he said.
Mr Brody said with Australian consumer law under review, the ruling demonstrated why unfair contract terms needed to be a focus of change.
Legal firm Herbert Smith Freehills partner Cameron Hanson said the court was not prepared to use consumer protection provisions to rewrite a contract freely entered into by a customer who knew the fees would be payable.
"The court accepted that companies have a legitimate interest in earning a profit and that fees and charges can be one of the ways in which they earn that profit," Mr Hanson said.
"The court was also concerned that customers who pay on time are not effectively forced to cross-subsidise those customers who pay late."
Credit card late payment fees range up to $35, with some not attracting a charge.
The ANZ reduced its fee from $35 to $20 in December 2009.
