Bill to force disclosure of break fees
National MP Aaron Gilmore is hopeful that a bill he launched to force mortgage lenders to disclose the cost of breaking fixed rate loans will lead to legislation.
Sunday, June 28th 2009, 9:49PM
by Maria Scott
Gilmore's Private Members' Bill had focussed attention on the issue and he was in discussions with the Minister of Consumer Affairs, Heather Roy.
He expects his Credit Contracts and Consumer Finance (Break Fee Disclosure) Amendment Bill to be picked up in a government review of consumer finance legislation currently underway and included in a future government bill.
He wants lenders to be required to publish the cost of break fees in cash terms. Many borrowers have been shocked to discover the cost of breaking fixed rate mortgages.
The Banking Ombudsman's office has received many complaints and the Commerce Commission has investigated the levels of charges made by leading lenders.
Banks use various methods for working out the cost of break fees which generally increase as rates fall because of the cost to banks of allowing borrowers to abandon loans taken out when rates were higher. The Commission announced at the end of April that ASB, SBS, BNZ and National Bank had using formulae to calculate the break fees that were appropriate under the Credit Contracts and Consumer Finance Act. Investigations into Kiwibank, Westpac and ANZ were continuing.
Banking Ombudsman Liz Brown says that despite the ruling by the Commission it was still worthwhile for borrowers upset about break fees to approach her office as the size of fee itself was not the only aspect of the issue that might give grounds for complaint. In one case her office had ruled in favour of a borrower who claimed they had been misled about the fees.
Gilmore said that his bill did not aim to address the amount being charged by banks but to ensure that customers were made aware of potential costs.
| « ANZ's bottom line drops, but interest income up | Westpac's profit plunges as charges for bad loans soar » |
Special Offers
Commenting is closed
|
|
Printable version |
|
Email to a friend |
