The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

27 June 2010


Joint Media Release
The Hon Chris Bowen MP
Minister for Human Services
Minister for Financial Services, Superannuation and Corporate Law

Government Moves on Unfair Mortgage Exit Fees

The Gillard Government today announced key reforms to help deal with unfair mortgage exit fees.

These reforms will strengthen the hand of Australia's credit regulator, the Australian Securities and Investments Commission (ASIC), to pursue banks over unfair mortgage exit fees.

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.

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.

The Government is determined to make the banking system work for families, not against them, and these tough new powers are a major step to delivering on that commitment.

From 1 July 2010, ASIC will have the power to take action against any bank if they charge an early exit fee which is considered unfair or unconscionable to a consumer. Consumers will also be able to challenge early exit fees that are unfair or unconscionable.

The Government has given ASIC these tough enforcement powers by passing two new national laws to protect consumers:

  • The new Australian Consumer Law – reflected in the Australian Securities and Investments Commission Act 2001 – which bans any 'unfair' term in a standard consumer contract; and
  • The new National Consumer Credit Protection Act  – which gives ASIC further powers to take action on any fee which it considers to be 'unconscionable'.

If any bank seeks to simply re-badge their current mortgage exit fees as upfront entry fees, ASIC will have the power to pursue the bank if it appears that the fee is 'unconscionable' under the National Credit Code.

ASIC is most likely to take action against banks which try to profit from exit fees or establishment fees – rather than fees which merely recover a fair level of costs.

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.

ASIC today released guidance on how it proposes to tackle unfair terms. Following consultation with the banking industry and other stakeholders, ASIC will develop a specific framework on how it will regulate early mortgage exit fees.

The global financial crisis has created some significant challenges for competition in the mortgage market. These can't be solved overnight, but the Gillard Government is determined to take action wherever possible to boost competition and improve protections for Australian families.

27 June 2010