Australian banks have defended their penalty fees which are taken from late payments and overdue accounts of their customers.

According to figures released by the Reserve Bank today, penalty fees have peaked up to $1.2 billion in 2009, and remained steady from 2008. The figure represents 10 per cent from its total banking fees.

“The reason banks have cut fees is not because they’re concerned whether they’re legal or not,” said Steven Münchenberg, chief of the Australian Bankers’ Association.

“The industry believes these fees are definable but equally, they are very unpopular.”

Banks charging for penalty fees from overdrawn accounts or late payments, were followed by a 110,000 class action suit filed by Maurice Blackburn against 12 major Australian banks.

James Middleweek, the founder of Financial Redress and the head of the legal suit against the banks said that banks have unfairly treated customers with unfair fees, resulting in a $1.2 billion profit taken from penalty fees.

Mr. Middleweek urged more plaintiffs to join the class action.

The firm is aiming to recover an estimate of $6 billion paid by customer to banks.

"If you want to improve your customer satisfaction and attract more customers from you competitors it makes obvious sense to get rid of what is the most unpopular among customers,” Mr Münchenberg said.

A data released by Australian Banker's Association pointed out that household paid $1.01 billion in exception fees in 2009. Transaction accounts totaled up to $467 million while loans amounted up to $536 million.