RG 220 Early termination fees for residential loans: Unconscionable fees and unfair contract terms
Issued 31 August 2011
This is a guide for lenders who provide home loans or residential investment loans (residential loans) regulated by the National Consumer Credit Protection Act 2009 (National Credit Act).
It gives general guidance on when an early termination fee for a residential loan may be unconscionable under Sch 1 of the National Credit Act (National Credit Code) or unfair under the Australian Securities and Investments Commission Act 2001 (ASIC Act). It sets out the factors ASIC will consider in deciding whether to take action on potential breaches of these provisions.
From 1 July 2011, the National Consumer Credit Protection Regulations 2010 (National Credit Regulations) prohibit early termination fees for residential loans, subject to some limited exceptions. This guide is relevant to credit contracts for residential loans:
- with early termination fees that were entered into before 1 July 2011, or
- with early termination fees not prohibited by the regulations (e.g. break fees).