| Australian gov't to outline reforms to control banks |
| Date: 2010/11/8 Click: 1680 |
|
Australia's financial regulator on Monday said it will take to court banks that try to profit from unfair mortgage exit fees, under new guidelines to be announced this week.
ĦĦĦĦ
ĦĦĦĦAs public frustration with banks grows, the government has been under pressure to act to control banks following the Commonwealth Bank's decision to raise rates by 45 basis points, immediately after the central bank lifted 25 basis points for official rate on Tuesday.
Westpac, Australia and New Zealand Banking Group (ANZ) and National Australia Bank (NAB) were expected to announce increases of their own this week.
The Australian Securities and Investments Commission will outline how it will enforce new laws that allow borrowers to challenge unfair contract terms and fees.
At present, borrowers have to pay about 1500 U.S. dollars in fees and charges to switch banks, particularly in the first four years of a loan when exit fees are up to 900 U.S. dollars. This reduces the advantage of switching to another bank with a lower interest rate.
Under the new laws, which took effect from July, borrowers can challenge fees that are larger than the cost to the bank, or if the bank acts in an unconscionable, misleading or deceptive way.
"Our guidance is designed to illustrate when Australian Securities and Investments Commission (ASIC) is more likely to take action, rather than set out a definitive view of the law," the commission said in a statement released on Monday, adding that the commission has the power to take a bank to court to have unfair loan conditions, including excessive exit fees, declared invalid.
Treasurer Wayne Swan said the new guidelines would make it easier for borrowers to switch banks and increase competition in the sector.
"I've been concerned for some time that banks have been using exit fees to lock customers in even while they raise their mortgage rates as sometimes exit fees can be so high that they completely wipe out the savings from switching to a cheaper mortgage with another lender," Swan told Australia Associated Press on Monday. |
