Friday, 6 May 2011

FROM JULY 2011 NO MORE EXIT FEES or now known as DEF

What is a DEF - its an exit fee for breaking your loan and getting refinance.
2 things this effects. NEW LAW effective JULY 1 2011.

1. You won't pay a fee on leaving your bank and it is suppose to make it more competitive.

NAB banks famous adds "We are breaking up with the other banks" WORKED well
shares in NAB are up and profits. SMART tactic, they knew the government was going to announce this and so they decided instead of competing on an open market where everyone could change bank after JULY 2011 for  no exit fee anyway.

2. You broker will have to charge a claw back fee . If you do refinance then the broker will loose their commission. They will charge a claw back fee.
You will have to consider this if you are flipping a property and the broker does not get his cut of the loan so maybe they charge you a fee...


The impact of the DEF ban on brokers will be "negligible", Advantedge has claimed.
and Australian Broker News. Though many small lenders have announced commission clawbacks as a result of the ban, Advantedge general manager of lending distribution Brett Halliwell has told Australian BrokerNews he does not believe brokers will suffer increased clawbacks as a result of the ban.

source :

Credit watchdog ASIC is likely to issue an update to its guidance on "unconscionable" exit fees, following the Government's 'victory' in passing the ban.

On Wednesday, Treasurer Wayne Swan hailed the banning of all exit fees from 1 July as a "victory for Australian families", despite widespread mortgage industry opposition due to competition concerns.
However, the development implies that ASIC's previous guidance on the issue (Regulatory Guide 220), is now outdated.

When contacted by Australian BrokerNews, ASIC has confirmed it is "contemplating an update" to its guidance, following the passing of the exit fee ban into law.

RG 220 was developed after a full round of industry consultation, which culminated in providing definitions of what constituted "unconscionable fees" and "unfair contract terms" .

As part of the guidance, ASIC had given the green light to DEFs, as long as they reflected loan costs.
Gadens Lawyers senior partner Jon Denovan labelled RG 220 at the time as "a well thought out statement of law". "It strikes a fair balance between the interests of consumers and industry.

We’ve all heard the story that the Telco that provides phones without an exit fee won’t be in business long. 

The same applies to lenders," Denovan said. "The good news is that RG 220 recognizes the role that brokers, mortgage managers, and aggregators play in borrowers obtaining a loan and allows those costs to be taken into account in determining whether an exit fee is fair. Go ASIC!"
Despite the ban on all exit fees, the 31 page RG 220 is still available on ASIC's website.