a clamp on bank exit fees being proposed

Treasurer Wayn Swan to act on mortgage exit fee rip-off

Ben Packham and Michael Harvey From: Herald Sun November 04, 2010 12:00AM

HOMEBUYERS battling unfair interest rate rises could soon be able to walk out on their greedy banks without having to pay crippling exit fees.

The Federal Government is looking at banning exit fees - which can cost more than $1000 - to stop the interest rate rip-off that has enraged Australia.

Treasurer Wayne Swan is preparing to unleash a new wave of banking reforms, with the mortgage exit fee bans to be considered by Cabinet within weeks.

Banking insiders say the Commonwealth Bank's brazen rate rise - almost twice that announced by the RBA yesterday - has given the Government no choice but to act.

"The banks should not underestimate for one moment the determination of this Government to put in place a range of reforms which will make the system more competitive," an angry Mr Swan said.

A clamp on exit fees would be among a series of penalties on the big banks, which have reported a combined cash profit for the last financial year of $21.7 billion.

The record profit is up 33 per cent on last year and represents almost $1000 in profit for every Australian.

Just how fat are these cats? Charting the big banks' recent profits:




A fuming Mr Swan said the measures would curb the "arrogance" of the banks and also include increasing the powers of the competition watchdog, the Australian Competition and Consumer Commission.

"Clearly, (the big banks) have behaved in an arrogant fashion and, clearly, what we will do is make the system more competitive, to give more powers to the ACCC and put in place a range of further reforms to keep them honest," he said.

Furious mortgage holders are lining up to dump the Commonwealth Bank, telling the Herald Sun this week's supersized interest rate increase was the last straw.

Consumer group Choice will today urge further measures, calling for bank customers to be able to switch lenders without paperwork hassles but while also keeping their account numbers - similar to changing your mobile telephone provider.

Other banks are yet to respond to the Reserve Bank's latest official rate rise but Mr Swan is moving to assert his authority over the multi-billion-dollar sector.

The Government is also looking at helping smaller lenders such as credit unions challenge the banks head-on for a bigger slice of the mortgage market.

And the consumer watchdog is set to get tougher powers to stop price-signalling by banks ahead of home loan interest rate movements.

Mr Swan is under intense political pressure to trump shadow treasurer Joe Hockey's nine-point plan against banks gouging profits from home loan customers.

The Treasurer has been working with banking industry regulators on a plan to increase the scrutiny of banks while breaking their stranglehold on the mortgage market.

Aussie Home Loans founder John Symond said that non-bank competitors needed more help.

He urged the Government to "crank it up" - increasing pressure on Canberra to pump extra funds into residential mortgage-backed securities to assist smaller lenders in accessing money at more competitive interest rates.

Mr Swan has already given consumers the power to challenge unfair exit fees and other charges.

But the corporate regulator, ASIC, is still examining how to apply the changes.

Mr Hockey called on the Government to release its crackdown immediately if it were really serious about getting tough on banks.

"Wayne Swan is looking shrill, he is looking like someone who doesn't know what he is doing," he said.

"If Wayne Swan has the solution to the banking challenge today, then he would release his announcements today."

- additional reporting by Wes Hosking

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