Australia’s fourth largest bank has agreed to settle a class action relating to interest charged on debts within credit cards' ‘interest free’ period. 

The allegations pertain to the period between July 2010 and December 2018; ANZ said the settlement is not an admission of guilt.

The class action, brought by Phi Finney McDonald, alleged ANZ charged interest to credit card holders who paid off their credit card balance within an advertised ‘interest free’ period. 

It claimed the terms related to interest charged on credit card debts were unfair, allowing ANZ to retrospectively cancel customers’ interest free periods. 

The law firm previously claimed the bank didn’t provide details of how cardholders could calculate potential interest charges and kept details of how charges were calculated unclear within contracts.

It alleged such lack of clarity prevented cardholders from understanding the consequences of not paying off their entire closing balances. 

“We believe the proposed settlement is an excellent outcome for group members,” Phi Finney McDonald principal lawyer Brett Spiegel said.

The practice of charging retrospective interest was banned in January 2019, on the back of amendments to the National Consumer Credit Protection Act. 

ANZ announced it has agreed to pay $57.5 million in settling the class action without admission of liability. 

The settlement remains subject to court approval. 

Representative applicant Daniel Tour filed proceedings against ANZ in the Federal Court in late 2021. 

The settlement sum falls within provisions set aside by the bank as of September 2023.

Phi Finney McDonald said further details on how to sign up for the proposed class action settlement and the process for its approval will be made available to those eligible in the coming months.

The stock market appears unfazed by the settlement agreement, with the ANZ share price up 0.96% in early morning trade.

Stock in the bank is swapping hands for $29.32 apiece at the time of writing – just 58 cents off the 52-week high it reached earlier this month.

It comes just months after the Federal Court penalised ANZ $15 million for failing to correctly display credit card holders’ account balances. 

Its failure led to around 186,000 cardholders facing unexpected fees and charges after withdrawing more funds than they were told they had available.

Image by Harrison Astbury