Early exit fees that punish borrowers and limit their ability to switch loans are being challenged by ASIC.
The regulator released a consultation paper yesterday on new laws regulating exit fees that are unconscionable or unfair.
Mortgage early exit fees: Unconscionable fees and unfair contract terms outlines ASIC’s proposal about its expectations for compliance with provisions in the National Credit Code and ASIC Act that apply to setting the price of exit fees and the explanation of the fees.
Under the National Credit Code such fees can be annulled or reduced in court, while under Australian Consumer Law an unfair term requiring an early exit fee to be paid can be declared void. ASIC also has new enforcement powers under consumer law provisions in the ASIC Act 2001.
“These new provisions strengthen ASIC’s ability to challenge unfair early exit fees. Excessive early exit fees may deter consumers from switching to another mortgage,” said ASIC Commissioner, Dr Peter Boxall.
“We strongly encourage stakeholders to provide feedback on our proposals, as this will assist us to further refine our guidance where necessary,” Boxall said.
ASIC will continue to meet with industry, consumer representatives and other interested stakeholders to discuss the application of the National Credit Code and unfair contract terms provisions to mortgage early exit fees.