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The newly appointed Prime Minister has already cracked down on unfair mortgage exit fees, announcing several key reforms.
According to a joint statement by the Deputy Prime Minister Wayne Swan and Financial Services Minister Chris Bowen, the reforms will give ASIC the ability to take action against any bank if they charge an early exit fee which is considered “unfair” or “unconscionable”.
From July 1, consumers will also be able to challenge early exit fees that are unfair.
“Currently, some banks are using mortgage exit fees to lock customers into their home loans. Exit fees can be so high that there is no incentive to switch to another lender, even if they are offering a substantially lower interest rate,” the statement read.
“These new powers will make it easier for borrowers to switch to a competitor who offers a cheaper rate, providing a major boost for competition in the mortgage market.”
In order to give ASIC these new powers, the government had to pass two new national laws.
The first, the new Australian Consumer Law – reflected in the Australian Securities and Investments Commission Act 2001 –bans any 'unfair' term in a standard consumer contract.
And the second, the new National Consumer Credit Protection Act, will give ASIC further powers to take action on any fee which it considers to be 'unconscionable'.
Any mortgage exit fee or other term found to be unfair by a court will be declared completely void, and ASIC will be able to seek refunds on behalf of customers if the fee has already been paid.
Mortgages are loans that are used to buy homes and other real estate where the property itself serves as collateral for the loan.
Mortgages are loans that are used to buy homes and other real estates where the property itself serves as collateral for the loan.