Consumer groups praise exit fee ban
Article by Mozo
The ban on banks imposing exit fees on home loans has been praised by consumer groups, which say it will now be easier for borrowers to switch to an alternative provider.
Under the previous system, many smaller lenders offered lower interest rates than major financial institutions, but imposed heavy exit fees for those who wanted to leave them.
Matt Levey, from consumer group Choice, told National Features: "Business models that rely on trapping consumers in uncompetitive deals have no place in a reformed banking sector."
His criticisms of the old system were echoed by Gerard Brody of Consumer Action, who noted that this system made it harder for Aussies to compare home loans effectively.
As of July 1st this year, banks and lenders were prohibited from levying exit fees on home loans customers.
Last month, a number of smaller lenders raised their application fees ahead of the law coming into force.
ME Bank now requires $150 with each application, while the Greater Building Society needs prospective customers to pay a $500 fee.
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