Big banks are effectively holding some of their customers to ransom by trying to enforce excessive terms of notice for discharging a loan, says a leading Queensland finance brokerage.
Brisbane-based Borro’s owner Cara Giovinazzo said she had been receiving complaints from clients about banks making it harder for customers to leave them by blowing out the minimum of days required to close an account or discharge a loan.
Ms Giovinazzo said the Commonwealth Bank of Australia (CBA) had advised that a minimum of 36 business days’ notice was required if they wanted to leave, which is almost four times the limit recommended by the nation’s consumer watchdog, while other lenders were also making it more difficult for their customers to move on.
“Some of these lenders are effectively holding their customers to ransom by increasing the minimum time required to close an account,” she said.
“There are also other tricks to deter customers from leaving such as failing to provide discharge forms or delays in processing them.
“These sort of tactics I believe contravene anti-competitive behaviour guidelines of the consumer watchdog, the Australian Competition and Consumer Commission (ACCC).
“Thirty-six business days is a massive deterrent to a customer looking to change banks when there has actually been a recommendation from the ACCC for discharge forms to be standardised
and processed within 10 business days.
“This leaves consumers potentially paying a higher interest rate for a lot longer should they be switching lenders to save money and get a lower interest rate. It could potentially cost the client an additional $600-$1000 in a two-month period, depending on how much interest they are saving by switching their home loan. Banks are potentially profiting off this delay across tens of thousands of clients.”
Ms Giovinazzo said an ACCC ‘Home Loan Price Inquiry’ report released late last year found many Australians with older home loans were continuing to pay higher interest rates than borrowers with newer loans, in some instances by more than 100 basis points.
“The ACCC recognises the wide range of home loan interest rates available and wants it to be as easy as possible for borrowers to switch lenders and has made recommendations to make this process faster, less confusing and less frustrating,” she said.
“But it’s extremely disappointing that we are actually seeing the opposite taking place with the behaviour of some banks making it harder for their customers to shop around and seek a more competitive offering.”