Nick Xenophon (SA, Independent) Share this | Hansard source

I wholeheartedly accept that direction and I move amendment (2) on sheet 7110:

(2)   Schedule 1, page 25 (after line 20), at the end of the Schedule, add:

Part 3—Amendments relating to termination fees and credit fees and charges

Banking Act 1959

1 At the end subsection 9(4)

Add "or the requirements of section 9AF".

2 After section 9

Insert:

9AF Variation of conditions of certain authorities

(1)   APRA must, within 30 days of the commencement of this section, vary the con­ditions of relevant existing section 9 authorities to give effect to this section and any new section 9 authority granted after that commencement to which this section applies must include conditions that give effect to this section.

(2)   The section 9 authority for a bank which has a market share of more than 10% must prohibit the bank from imposing an early termination fee in respect of any loan agreement or mortgage contract entered into by the bank after the commencement of this section.

(3)   If a bank which has a market share of more than 10% has an interest of 51% or more in a subsidiary which is an ADI, the section 9 authority for that ADI must prohibit the ADI from imposing an early termination fee in respect of any loan agreement or mortgage contract entered into by the ADI after the commencement of this section.

(4)   In this section:

bank means an Australian ADI that is permitted under section 66 of the Banking Act 1959 to assume or use:

  (a)   the word bank, banker or banking; or

  (b)   any other word (whether or not in English) that is of like import to a word referred to in paragraph (a).

early termination fee means any additional charge imposed on a borrower or mortgagor in any situation in which the borrower or mortgagor chooses to pay out the loan agreement or mortgage contract, as the case may be, ahead of the time specified in the relevant loan or mortgage contract.

market share means market share determined by APRA on the basis of proportion of total deposits.

National Consumer Credit Protection Act 2009

3 Before section 31 of the National Credit Code (in Division 4 of Part 2)

Insert:

30C Credit fees or charges relating to credit contracts

(1)   A credit fee or charge payable by a debtor to a credit provider must be reasonable.

(2)   ASIC may, if satisfied on the application of a debtor or guarantor that a credit fee or charge is not reasonable, apply to the court for an order annulling or reducing the credit fee or charge and for any other ancillary or consequential orders.

(3)   In determining whether a credit fee or charge is not reasonable, ASIC must have regard to whether the amount of the credit fee or charge materially exceeds:

  (a)   the credit provider's reasonable costs of undertaking the activity or service to which the credit fee or charge relates; or

  (b)    the credit provider's average reasonable costs of undertaking the activity or service to which the credit fee or charge relates in respect of that class of contract.

(4)   In considering an application by ASIC under subsection (2), the court must have regard to whether the amount of the credit fee or charge the subject of the application materially exceeds:

  (a)   the credit provider's reasonable costs of undertaking the activity or service to which the credit fee or charge relates; or

  (b)    the credit provider's average reasonable costs of undertaking the activity or service to which the credit fee or charge relates in respect of that class of contract.

[termination fees and credit fees and charges]

This first amendment prohibits banks of greater than a particular market share percentage from imposing an early termination fee in respect of any loan agreement or mortgage contract. It also includes a reasonableness test—or that is what it relates to.

According to APRA, based on total deposits the big four banks hold 75 per cent of the market. Westpac has 20.5 per cent market share, the NAB 16 per cent, ANZ 15.9 per cent, and the Commonwealth Bank 22.5 per cent. There is no question that there is a real concern about the lack of com­petition in Australia's banking sector because of the dominance of the big four. It is vital therefore that small lenders are given as much support and assistance as possible to ensure that they are able to continue to offer consumers alternative banking choices, and I believe that an unintended consequence of the government's blanket ban on exit fees is that small lenders will be pushed out of the market.

Unlike the big four, who can offset costs and who have much greater capacity for borrowings, the small lenders need to be able to charge basic fees to keep them in the market. The fact is that small lenders pay third parties to complete the administrative necessities of a home loan such as valuations and legal fees, and small lenders cannot offset losses like the major banks and there may well just be a case of cost-shifting.

But what concerns me is that since the GFC, with the guarantee that the government has put in place—which of course was welcome and was the right thing to do—the nuances of that in terms of the imple­mentation of that were that it simply strengthened the power of the big four. They increased their market share in business banking and the home loan sector and I fear that, unless we provide some support for those small lenders, consumers will ultimately be worse off.

So effectively that is what this amendment relates to. This amendment applies the ban on exit fees only to big banks with more than 10 per cent of market share and their subsidiaries, which are defined as being owned 51 per cent or more. That is the gist of this amendment and I urge my colleagues to support that. I am not sure what the coalition's view would be, but it would be not inconsistent with the measure that I co-sponsored with my colleague Senator Cormann on behalf of the opposition that sought a blanket ban on exit fees. It is not in the same form—I acknowledge that—but it is true to the general intent there about the impact that it would have on small lenders.