Bank discounts not a right: Ombudsman

Wednesday 20 June 2012

Homeowners are being reminded banks are not required to cut them a deal.

By Susan Edmunds

Over recent weeks there have been numerous media reports of banks trying to win business from each other with better interest rates and deal-sweeteners such as contributions towards legal fees and break fees.

Borrowers have reported receiving up to $5000 from banks to encourage them to move their lending.

But Banking Ombudsman Deborah Battell said her office had started to receive complaints from bank customers who had not been offered break fee discounts.

“Customers have heard that banks have been reducing or waiving break fees and they are complaining that their bank won’t do this for them.

“I am not aware of how widespread the discounting is, nor do I have direct evidence that it is happening,” Ms Battell said. “But I can say that banks are legally able to charge break fees and they are not obliged to offer discounts.

“Break fees are specifically allowed for in credit contracts legislation and are designed to compensate banks for the costs they incur when customers break their fixed term contracts.

“Banks can also decide whether they want to discount or waive fees and may choose to do so in individual cases. If this is happening, it is likely to be a response to the current highly competitive environment for lending. It does not mean that banks will do this for everyone.”

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