Cabinet to ban exit fees

The Federal Government is examining ways to increase competition, and could consider banning bank exit fees.

The Sunday Telegraph has been informed by cabinet sources that the Government is furious at the banks refusal to pass on the recent 0.25 per cent rate cut in full, accusing them of hijacking monetary policy as the Reserve Bank tries to free up cash in the economy.

Cabinet would examine other measures to increase competition if the banks continued down this highly pressurized area.

Assistant Treasurer Chris Bowen said he was considering drawing up a list, which would include penalties for banks that charge unfair exit fees. Mr. Bowen is planning to present a bill to Parliament in June and draft legislation, which will be published next month.

When customers wish to get out of existing loans or mortgages banks sometimes charge forbidden exit fees. Critics feel that lenders use the fees as an obstruction to borrowers switching between institutions. The laws could also cover service fees, default fees, and penalty fees.

Mr. Bowen further added that bank customers were constantly complaining about breaking out fees in the case of short-term cash-flow issues on mortgages and other products. He also stated that it had become more of an issue of concern as people had been looking to change their financial products.

"We are currently in the process of working through what options are available to us. One possibility is a ban."

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Published on April 4-th, 2009 in Home Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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