Exit Fee regulations

The regulations prohibiting exit fees on loans secured over residential property were made on 23 March 2011.  They apply to prohibit a credit fee or charge if:

• it is provided for in a contract entered into after 1 July 2011
• it is to be paid on or in relation to the termination of the credit contract, whether the liability to make the payment is incurred at that time or earlier
• any of the amount of credit is secured over residential property

Exceptions

The regulation does not apply to break fees of discharge fees. 
A break fee is the cost to the lender of breaking a fixed rate loan contract and the regulations reflect this.

A discharge fee is the fee that does no more than reimburse the lender for the reasonable administrative cost of terminating the credit contract.  It cannot seek to cover any losses.

Next steps

Lenders should review their fees payable on early termination to ensure that from 1 July 2011 any contracts entered into do not breach the prohibition.

Donovan Oates Hannaford, Lawyers is ready to assist.

Please contact Hadyn Oriti should you require any further information.
Hadyn Oriti
March 2011
P: +61 2 6583 0449
E: horiti@dohlaw.com.au