As customers overdrew accounts or fell behind on credit card and loan repayments since the nation was hit hard by recession last year, almost $1.2billion was paid in bank penalties.

However when the fee haul were attacked by political leaders and consumer groups, the banks declared that only if customers change their behavior was there a chance to reduce fees.

As per the latest figures unveiled by the Reserve Bank yesterday, total fees collected by banks rose more than 8 per cent to $11.6 billion last year, the fastest growth rate in five years.

It should be mentioned here that nearly $1.2 billion of the above mentioned amount was made up of so-called "exception fees", charged when customers violate the terms of a product, like falling behind on loan repayments, overdrawing a deposit account or missing a credit card payment.

Households were hit the hardest, estimating for about 83 per cent, or $961 million, of the exception fees charged, mainly on deposit accounts and credit card accounts.

An extra sum of $362 million in fees last year was paid by households overall, taking the total to $4.85 billion, with businesses paying $6.74 billion. About $640 million in fees were charged when customers used another bank's ATM.

“The latest rise in fees came as the banks benefited from a package of support from the federal Government to weather the global financial crisis, including a guarantee on deposits and on funds raised by the banks in international markets,” said a source.

(via TopNews New Zealand. Contributed by Surjit Singh)