Australian Banks To Cut Exit Fees
Australian banks have begun to review their charges ahead of a class action law suit by consumers, which will likely result in borrowers receiving cuts to their exit fees on mortgages.
The Australian Securities & Investments Commission (ASIC) on Wednesday issued guidance for a new law designed to make it easier for borrowers to switch banks, saying that fees were meant to only cover the cost incurred by lenders.
ASIC has also told the banks that they must stop the practice of “double dipping” where lenders charge borrowers both exit fees and up front loan establishment fees.
The regulator said it will take banks to court if it becomes aware that lenders are deriving profits from exit fees which can be as high as $8,000 on a $300,000 mortgage.
ANZ became the first Australian lender to scrap its exit fees on existing mortgages, whilst other banks have said they are examining ASIC guidelines which were released on Wednesday as part of new consumer laws that came into effect on July 1st.
Tony D’Aloisio chairman of ASIC says the regulator planned to target lenders who charged the highest fees.
“We will challenge lenders who charge high fees to justify how their fee reflects actual losses caused by early termination. Lenders cannot use exit fees to discourage a borrower from switching their loan or to punish them for doing so.” Mr. D’Aloisio said.
As part of the new regulations, customers will be able to sue their lenders in Federal Court, either individually or by class action in order to obtain reduced or refunded fees.
ASIC says that banks are not permitted to charge exit fees on variable interest rate loans which include either loss of profits or costs pertaining to marketing and development of new products.
Compare Australian Credit Card Deals
Comments
Leave a Reply