Consumer organisations are mounting campaigns for regulation of penalty fees charged by banks, credit unions and building societies ranging from cheque and direct debit dishonour fees, account overdrawn fees and credit card late payment fees to entry and exit fees. (Choice: unfair bank penalty fees).
Campaign supporters refer to a similar campaign in the UK (BBC News) and a decision in a test case in the UK which gave the Office of Fair Trading the right to assess personal current account unarranged overdraft and returned item charges for fairness . The test case decision (Office of Fair Trading v Abbey National PLC and 7 others) has been appealed for a further hearing later this year (Money UK)
Earlier this year the Government released the Australian Securities and Investments Commission’s review of mortgage entry and exit fees (pdf).
The review examined Australian mortgage fee data for 298 home loan products (standard, basic and introductory rate), from a cross section of large banks, 2 other banks, credit unions and building societies, and non-Authorised Deposit-taking Institutions (non-ADIs, also known as non-banks).
Findings included that a majority of home loans include an additional fee for early termination. However, there is significant variation in the method of calculation of these fees and, consequently, their size. On average, non-ADI lenders charge the highest early termination fees, followed by large banks. Within each lender type, there is a loan offered with a nil early termination fee.
Section 72(1)(c) of the Consumer Credit Code allows a Court to review an unconscionable early termination fee under a consumer credit contract.
In 2004 the Consumer Law Centre Victoria’s published a 90 page report, Unfair Fees: A report into penalty fees (pdf) charged by Australian banks (the Unfair Fees Report).
Credit unions should review the method of calculation of their charges to ensure that they reflect the actual cost and that they are not penalties, that they have the right to impose the charges under their contracts and that they are fair.