By Stuart Washington
NON-BANK lenders may be acting illegally when they charge borrowers exit fees of up to $14,000 for repaying variable rate home loans early, research has found.
Lenders - apart from banks and credit unions - were found to charge, on average, $1900 to repay a $250,000 variable rate home loan, well above average exit fees of $420 for credit unions and $680 for large banks.
Lenders in the high-exit-fee category include non-deposit-taking lenders such as the successor to RAMS Home Loans, RHG, AIMS Home Loans, HomeStart Finance and Aussie.
A research paper by the Melbourne Law School's Centre for Corporate Law and Securities Regulation said high exit fees could lock in borrowers and restrict competition.
The centre's director, and a report author, Ian Ramsay, called on the Australian Securities and Investments Commission to issue guidance to lenders about what made up a reasonable exit fee.
The research found the higher exit fees were likely to be well above the costs lenders faced from the early repayment of home loans.
It also noted the new National Consumer Credit Protection Act made it illegal for lenders to charge above a reasonable estimate of their own costs.
A former variable rate home loan customer of RHG, Graeme Hammond of the Melbourne suburb of Hughesdale, said he was initially faced with break fees of about $10,000 before they fell to $7500.
He said he felt trapped in the loan. ''I no longer wanted to be a customer of theirs … knowing there was no real possibility of escape,'' Mr Hammond said yesterday.
■ The Australian Bankers Association has complained to ASIC about an advertisement by the credit union industry group Abacus.
The ABA argues that the advertisement's assertion that credit union borrowers would save $35,000 over the life of a comparable bank home loan is misleading.