Almost 6,500 customers of the rump of the failed RAMS Home Loans business RHG Ltd will share in more than $3.3 million in refunds, following concerns about fees charged on their loans were "unconscionable".
‘‘RHG has reached an agreement with ASIC to address concerns raised by ASIC in respect of fees charged by RHG on certain loans,’’ RHG said in a statement today.
‘‘Affected customers will receive refunds ranging from $50 to over $10,000, with the most common refund being $400,’’ ASIC said.
RHG disclosed last year that it was being investigated by the financial services ombudsman.
The Australian Securities and Investments Commision, ASIC, said it was acting in response to complaints and raised concerns about ‘‘discharge and early termination fees charged on home loans terminated since 1 July 2010.’’
The company has among the highest numbers of complaints from lenders and is known for its high exit fees.
‘‘RHG has also agreed to reduce its discharge fees on existing loans and to the staggered removal of early termination fees for thousands of customers going forward,’’ the regulator said.
ASIC concerns
ASIC said it was ‘‘concerned some of RHG’s fees were unconscionable or unjust under the National Credit Code’’.
Among the concerns expressed by the regulator:
- early termination fees on RHG’s Interest Saver products were increased for existing clients from $1,400 in the first year (reducing to $700 in the third year), to a flat fee of $2,000 in the first three years;
- discharge fees were increased for existing clients from $590 to $990
- early termination fees were calculated by reference to the amount borrowed (e.g. a percentage of the amount borrowed);
- and early termination fees did not reduce over time.
ASIC said it ‘‘took action in relation to RHG after receiving a significant level of complaint.’’
RHG was formed when the RAMS Home Loans business collapsed at the start of the financial crisis, just weeks after its public listing.
The brand and ongoing business of RAMS was sold to Westpac while the existing business was hived off as RHG as existing mortgages run down. RHG does not write new loans.
It proved so profitable that RAMS founder John Kinghorn, who pocketed more than $600 million from the sale of the business, launched an unsuccessful buyout of RHG last year, and has since quit his involvement with the company.
ASIC said RHG has started notifying customers who may be entitled to a refund as well as those current customers who will have their fees waived or reduced.