The largest issue is when we get something posted that is absolute trash, and people continue to report the user/post even after they have been banned. Unfortunately the plugin installed is not discriminatory between temporary or permanent bans, but there is a moderator watch/monitor feature that can and does also prevent the user posting, if they have a moderator restriction placed upon the account they will not be flagged as banned.
As for the legal side of things, I am no Lawyer but I can't see how making it known that are user is no longer a welcome part of this community could be considered defamation. If it was making public the reason for the ban, then yeah, I could see that could be potentially an issue, but it is the same as refusing to service someone that enters your shop, you have the right not to do business with them and demand they leave the property.
According to the
Australian Law Handbook 2017 on the topic of Defamation:
Several defences or justifications, including truth, are available
Stating they are banned is a truthful fact.
For example, we had to ban a user just recently, they were privately dealt with first, a warning was issued. The user continued to be rude and was informed as such, the response was absolutely disgusting. They were his own words posted publicly, the ban is self evident as to the reason, and as such can not be seen as defaming him for posting such utter garbage, since he was the one who wrote it.
And finally, seeing that users have been banned on forums has become an expected feature of forums in recent years, I can name several large commercial forums that have been tagging accounts as banned publicly without incident for years now (overclock.net, RealGM, Steam/Valve, EA).