Default fees which lawyers launching a class action claim are excessive have been overseen by the Commerce Commission for a decade, bankers say.
The Fair Play on Fees campaign on Monday launched the class action, thought to be the largest in New Zealand's history, claiming the banks unlawfully overcharge their customers in dishonour and honour fees and late payment charges.
The campaign is led by lawyer Andrew Hooker, Australian consumer law firm Slater & Gordon, and Litigation Lending Services, with hopes of getting 50,000 New Zealanders to sign up.
Mr Hooker says banks charge customers an average of $15 every time they overdraw their accounts, pay their credit card late or bounce a cheque.
But he says by law the fees must reflect the actual cost to the party to the fees, but "the cost to the bank is actually just a few cents".
"These fees are excessive and add up to around $1 billion over the past six years."
New Zealand Bankers' Association chief executive Kirk Hope said the case was being driven by Australians, in whose country a similar action was under way, and they didn't realise the New Zealand banking sector operated differently.
"Three of the four main fees being targeted by this action have been overseen by the Commerce Commission for the last ten years," he said.
"Banks work hard to attract and keep their customers and will work with them to reduce their fees."
An online advertising campaign will be launched to encourage people to sign up to participate in the case.
The class action will be funded entirely by Litigation Lending Services and claimants will have no upfront costs.
Litigation Lending Services spokeswoman Michelle Silvers says they have an extensive budget "in the millions" for the case.
But Mr Hope encouraged customers concerned about the fees to talk to their bank rather than lawyers.