Industry backs recommendation to scrap ban on exit fees
A Senate committee on competition in Australia’s banking sector has recommended the Government reconsider its proposed ban on exit fees, with much industry support.
The Senate’s Economic References Committee stated that rather than abolishing exit fees, it recommended the Government give the recent ban on unreasonable exit fees by the Australian Securities and Investments Commission (ASIC) a chance to work.
It also said it was notable that the only financial intermediaries that openly welcomed the ban of exit fees were the major banks.
Mortgage Choice chief executive Michael Russell strongly supported the committee’s recommendation on exit fees due to the unperceived adverse effects it would have on competition.
“Should the Gillard Government unilaterally ban exit fees, then it will unwittingly hand over on a plate the heads of the non-banks to the major banks.
“Why? They are reliant upon this fee to be able to remain competitive at the front end, where real competition counts for the consumer,” Russell said in Mortgage Choice’s submission to the Treasurer.
Mortgage provider FirstMac also welcomed the recommendations, with managing director Kim Cannon stating a ban on exit fees would likely create a class of ‘rate shoppers’ which would increase costs for all lenders, with costs passed on to consumers.
But Cannon said he did not agree with the senate committee’s further recommendation that if a ban were to be implemented, that it should only apply to authorised deposit-taking institutions (ADI).
Cannon said he did not think it would create a truly level playing field, and it would erode the benefits of competition for consumers.
The Mortgage & Finance Association of Australia (MFAA) chief executive Phil Naylor (pictured) disagreed, stating if a ban on exit fees were to be introduced, small lenders should be exempt.
“The deferred establishment fee (which was considered an exit fee) brought down the margin on home loans for thousands of Australians,” he said.
“Lenders such as Aussie and Wizard used the deferred establishment fee to reduce mortgage costs and compete with the banks.”
Recommended for you
An advice AFSL has seen its licence cancelled by ASIC this month for failing to pay an AFCA determination, which was then covered by the CSLR.
The FAAA’s Phil Anderson believes the problem with Dixon Advisory is “much bigger than an advice issue” and the levy to pay for it should be expanded beyond the financial advice sector.
ASIC commissioner Alan Kirkland says the problems regarding advisers recommending clients to invest in the troubled Shield Master Fund are far from being an “isolated incident”.
Advice professionals are being encouraged to proactively engage with their staff on mental wellbeing, with a new report finding a surge in employee exhaustion and stress over the past year.
