The Commerce Commission has found that loan break fees charged by four banks are "likely to be reasonable" and is continuing to investigate the fees charged by three other banks.
The commission said today it had been investigating break fees charged by banks to ensure that the fees complied with
the Credit Contracts and Consumer Finance (CCCF) and Fair Trading Acts. The ASB, SBS Bank, BNZ and National Bank are the four banks cleared so far by the commission's investigation.
A break fee, or prepayment fee, is a fee charged by a creditor to recover its loss when a customer repays their loan early. Banks have been criticised for their charges as customers try to take advantage of current falling mortgage rates by breaking existing fixed interest loan agreements.
Commission fair trading manager Graham Gill said under the CCCF Act banks were entitled to recover their loss when a customer made an early prepayment or broke the term of a fixed interest loan, as long as the banks used what the Act described as "an appropriate procedure to calculate a reasonable estimate of loss".
"The commission has completed its investigation into the fees charged by the ASB, SBS Bank, BNZ and National Bank. These four banks all charge break fees based on the movement in retail interest rates," Mr Gill.
"It is the commissions opinion that the formulae used by these banks are likely to be appropriate under the Act and the commission will be taking no further action against these banks in relation to these formulae.
"However, the commission's investigation into the break fees charged by ANZ, Kiwibank and Westpac will continue."
The commission would be making no further comment on the continuing investigation.
- NZPA
