New Zealanders are being urged to climb aboard a giant class action suit to claw back more than $1 billion of unfair default fees from the major banks.



The legal action - claimed to be the largest the country has seen - is being led by New Zealand lawyer Andrew Hooker, Australian class action experts Slater & Gordon and litigation funder Litigation Lending Services (NZ).



While overdrawn accounts, bouncing cheques, and late credit card payments usually incur fees of $10-$20, Hooker said the real cost to banks was just a few cents.



He said the $1b headline figure was a "very conservative" estimate of the scale of gouging that had gone on over the past six years.



The case will be based on a principle of contract law which says customers can only be charged a default fee that reflects the reasonable cost to the lender.



Banks had simply ignored the principle for years and customers had been helpless to fight them, Hooker said.



"Why would you sue a bank for $15 or even $20? That's why we have a class action."



Anyone who has had to pay these "exception fees" over that time period can register on the newly launched website www.fairplayonfees.co.nz.



The lawsuit will operate on a no-win, no-fee basis, so consumers have nothing to lose by joining the action.



The litigation funders, who Hooker stressed were taking all the risk, will take a 25 per cent cut of the proceeds if it is successful.



Hooker was confident of getting the minimum 10,000 or so registrants required to go ahead, and said as many as 1 million New Zealanders could be eligible.



The papers will not be filed with the High Court until the threshold is met, and so the defendants have not been formally named.



However, Hooker said the big four Aussie banks - ASB, ANZ, Westpac and BNZ - were all being targeted, as was Kiwibank.



"No-one's off the hook."



Litigation Lending Services managing director Michelle Silver said she was looking forward to a "heavy fight" which was likely to take two to three years.



The lawsuit parallels a legal battle being waged in Australia, where 12 Australian banks are being sued over the same issue.



Some 170,000 Australian customers have jumped on board the action and are seeking to claw back more than A$223 million (NZ$278m). Eleven of the 12 cases are on hold until the outcome of a test case against ANZ Bank.



The lender lost a battle in the Australian High Court in September, and will now have to convince the Federal Court that its fees were a genuine reflection of costs.



According to Fair Play on Fees, the legal principles involved are close to identical to the New Zealand situation.



In mid-2009, many local lenders drastically slashed their exception and dishonour fees in response to a Commerce Commission investigation.



Westpac, for example, cut exception fees on all credit card and accounts from $25-$30 down to $9, a move that cost it about $50m each year. Its fees have since crept back up to $15-$19, similar to most of the other lenders.



Hooker said local banks would be unsurprised by today's announcement, given that their parent companies were already being sued across the Tasman.