A threat by the Coalition to overturn the Gillard government’s ban on bank mortgage exit fees has prompted an angry response from consumer group Choice.
The ban is due to take effect from July 1, but can still be reversed by a majority vote in federal Parliament.
The Coalition would need the votes of two crossbench senators to overturn the ban under the current numbers in the upper house.
But the task would be more difficult after July 1, when the Greens alone will hold the balance of power. The Greens have in the past strongly advocated a ban on exit fees.
Nationals Senator John Williams said he had always opposed exit fees as they stifled competition. He said the ban should apply only to larger lenders, and smaller lenders should remain free to charge the fees.
Under Senator Williams’s plan, the ban would apply to ”authorised deposit-taking institutions,” the larger lenders regulated by the Australian Prudential Regulation Authority, but would not cover smaller lenders which come under the remit of the Australian Securities and Investment Commission.
Independent Senator Nick Xenophon said he would support the Coalition move, as he believed a blanket ban on exit fees would disadvantage smaller lenders the most. ”If you adversely impact on the smaller lenders, it will hurt consumers, and the big four banks will be laughing all the way back to themselves,” he said. ”We need to go back to the drawing board.”
But Matt Levey, the head of campaigns for Choice said such arguments were misguided.
”Business models based around trapping consumers in uncompetitive deals through complex and costly fees have no place in a reformed banking sector,” Mr Levey said.
”This is no time to retreat from genuine reform,” he said.
”Removing exit fees will pressure lenders to compete on up-front price and customer service, or else face the risk of customers moving their money to get a better deal.”
Treasurer Wayne Swan said there was no justification for exit fees and hit out at shadow treasurer Joe Hockey.
”I am just gobsmacked that Mr Hockey and the Liberal Party could talk about bringing back unfair mortgage exit fees as high as $7000. I think it just shows it’s another cheap political stunt from the Liberal Party who are completely out of touch with the needs of bank customers.”
The fate of the ban will depend on how Family First Senator Steve Fielding and Greens senators vote. Neither Senator Fielding nor Greens banking spokesman Adam Bandt could be contacted yesterday.