Taking On The Big Banks

Reporter: James Thomas

When the reserve bank cut the official interest rate last week, most of the big banks defied history and refused to pass them on to customers.

One lawyer, John Mahony, has declared enough is enough and is launching a class action in a bold attempt to make them live up to their obligations.

Mr Mahony makes it clear he is not resting until the banks pass on the Reserve's rate cut in full.

"People are sick and tired of being sick and tired," he said.

"This is an opportunity for their voice to be heard."

John's plan is to sue the banks by launching a class action in the courts.

"What we submit is that the mortgage contract has implied within it a term, which based on the convention of over 40 years says that the banks will vary interest rates in accordance with the movement in the Reserve banks," he said.

They have not done that, so John is stepping in where he said politicians are reluctant to go.

"The Australian population now requires legislation from the government to say to the banks, once the Reserve moves the interest rate, you are to follow the Reserve's move in the interest rate," John said.

But the government has so far refused to take this step of substance. During this crisis the banks will actually turn a much greater profit than they have in the past. One example of absolute gouging is the $2 charge of taking money out at the ATM.

The Reserve Bank governor said it should cost less than 10 cents. John hopes the answer to these issues begins with his class action. He already has 150 people signed up.

"Once we have 5000 people contributing $100 each, we then have a fighting fund of $500,000, which is substantial and allows us to go to the high court if necessary," John said.

John will be paid but insists his primary motivation for the class action is the greater good.

"Sounds cliched, but I don't like bullies, I don't like being told what to do and I don't like the banks standing over people as has happened for a long time."

Not surprisingly, the big banks were missing in action when we asked for comment.

Director of the Centre of Corporate Law at Melbourne University, Professor Ian Ramsay, thinks John will have little chance.

"He's really trying to say that all the loan contracts that both major banks and small banks have entered into with thousands and thousands of people across the country, they are really all invalid," he said.

"That's such a difficult thing for a court to order."

Contact information

If you would like to contact John Mahony to be part of the class action, please email him at law@mdlawyers.com.au