ACCC allows Wizard Home Loans to waive home loan contract exit fees

Posted by LC Team, Monday, May 4, 2009

The ACCC has allowed Wizard home loans to waive the deferred administration fee for those transferring to Aussie, but not to other home loan providers.  You can read the full press release from the ACCC below:

AMS Mortgage Services Pty Ltd proposes to waive the deferred administration fee for early termination of Wizard branded home loans where a customer chooses to refinance with Aussie Home Loans.

The Australian Competition and Consumer Commission will permit this arrangement which involves third line forcing, after a notification was lodged by AMS.

Third line forcing is a type of exclusive dealing conduct prohibited by the Trade Practices Act 1974. It involves the supply of goods or services on condition that the purchaser acquires goods or services from a particular third party. By lodging a notification with the ACCC, businesses may obtain protection from legal proceedings under the Act. Provided the ACCC does not object, protection commences 14 days after lodgment.

Under the Act, the ACCC will only object to and remove the immunity provided by an exclusive dealing notification when it is satisfied that any public benefits from the proposed arrangement would not outweigh the public detriments.

“The ACCC considers the arrangement will result in cost savings for customers who choose to refinance with Aussie, by relieving them of their contractual commitment to pay the deferred administration fee,” ACCC Chairman, Mr Graeme Samuel, said.

“The fee waiver offer was required by Aussie as a condition of its recent acquisition of the Wizard home loans business. To the extent that the arrangement encourages other brokers or lenders to make similar offers, the ACCC considers that it may encourage competition in relation to AMS customers.”

The ACCC notes that customers can choose not to take up AMS’ offer and instead, refinance with another broker or lender offering a product that better suits their needs.

A number of customers complained about AMS’s level of service and its decision not to pass on recent interest rate cuts. The ACCC notes that these issues are likely to exist regardless of the AMS fee waiver offer, and therefore are not directly relevant to the assessment of the notification. However, the ACCC remains concerned about these complaints and will continue to discuss the issues with affected customers and the Australian Securities and Investments Commission, which is responsible for consumer protection matters in financial services.

The assessment of the notifications will be available from the ACCC’s website under the authorisations and notifications public register.

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Filed Under: Broker News, Consumer, Lender News

6 Comments

Bill May 4, 2009

Bullsh*t, there I got it out of my system!
I should move to Italy, at least we know the Mafia operates out in the open there! Collusion. Third party forcing of course with an exception. Could the UCCC have not used their power (they do have power, don’t they) to waive that fee for everyone, not just Aussie, this would have given greater benefit and yes, fairness, in the marketplace!
Back to work for me.
Cheers!

Greg May 4, 2009

Obviously Aussie John has the money to pay off the ACCC. I lost one ex Wizard client to it. Aussie are now seen to be above the Law.

Abdullah May 5, 2009

Mr Graeme Samuel is the same person who believes from his research (with tax payers dollars) that the major fuel companies don’t engage in price fixing, predatory pricing or cartel operations and price of petrol all “mythical market forces”.
He may though believe in the Tooth Fairy, The Easter Bunnny and Santa Claus after this decision of complete lack of understanding of the real issues of the AMS consumers effected by the higher rates with GE.

Welcome to Noddy Land for brokers where we are treated like Mushrooms and fed animal waste for nourishment by banks, mortgage insurers and the government.

His comments are full of “consumer protection” banter however he fails to understand the key issue of the consumer in the AMS/Wizard/Aussie Charade. Choice and no cost to the client to leave a product that was not delivered by Wizard. The ACCC failed the client.

If a AMS/Wizard customer wants to choose to leave the AMS contract they will be charged a DEF for leaving a product that had it’s interest rate frozen (when the consumer where sold the loan on the basis of being a competitive variable rate with GE) and was sold in the 1000’s by Wizard on the competitive variable rate basis. As AMS didn;t deliver the product profile by not passing on rate drops as much as one would expect for a competivie variable rate then why should a consumer be forced to pay DEF to leave the contract at all. This was the issue at hand Mr Samuels. He has twisted the story to place Aussie to be the savior on the people and that there actions may encourage other brokers/lenders to make similar offers like the AMS deal. Other brokers/lenders would not be in financial break-even position to cover the DEF if DEF was to be paid for. He just doesn’t get it.
If Aussie owns the operations and a condition of the purchase was no DEF to move the AMS loan book then I don’t see Aussie being charged anything directly off the p/loss and in fact Wizard brokers will earn commission on the same client for poor decisions to start with by Wizard Management for placing a lot of loan eggs in the GE Basket. At the least the ACCC should have made for any commissions paid on the new refinance business of a Wizard client to be given 100% back to cover clients inconvenience , interest loss and costs of refinance outside the DEF. Aussie John could put his money where his mouth is. “It’s not rocket science” John, give the consumers of Wizard no costs to move.

The ACCC has approved 3rd line forcing to be undertaken in this case to a firm that may not be paying the direct fee to AMS and restricting income to be earned off the refinance of the loan only to Aussie/Wizard and forcing the client to deal with one provided, clear and simple. Graemes contacts at the Big 4 are quite happy with the decision as 92% of new business is going to them at present and so they are the big winners as well. That’s right CBA have interests in Aussie.

The consumer’s story is fairly simple thus far.

1. Visit Wizard and get recommended to do a competitive variable rate with Wizard. Don;t worry about DEF as rate is competitive and no need to leave when you have a competitve product.

2. Rate turns out to be a lemon due to GE policy.

3. Consumer on higher rates angry and look to refinance and certainly not with Wizard as they placed me in this product. DEF is huge.

4. Aussie buys Wizard.

5. Wizard writes and calls client and encourage them to refinance to the promised land. Client are told about he DEF carrot. Client likes carrot but not paying application, government, settlement fees and in cases LMI costs. Where is the government when I need them some help.

6. ACCC rule Aussie are doing a wonderful community service to it’s abandoned new customers by not charging FED for refinancing them to a lower rate, not paying for the other costs and taking a big commission off the major banks the clients may have left from at Step 1.

7. Client refinances from major 4 due to not passing on interest rate drops by res bank. The circle of life.

Client have paid at Step 1 to leave other bank if refinance and go to Wizard and again at Step 5 to leave AMS and will pay again to be left with a major at step 7.

Some time down the track the clients placed back into the Big 4 will say that price fixing, collusion and cartel operations are in place. The ACCC will investigate again and likely come out with the same decision as the oil companies. ” Market forces”.

232 Sleeps until Santa Comes comes as I am now a believer as I have to believe in something.

THIS DECISION IS NOT FINE AND VERY SAD DAY FOR CONSUMER RIGHTS AND PLACING FAITH IN THE ACCC. ONE CAN’T BE A HALF PREGNANT IN A THIRD LINE FORCING DECISION.

THE DECISON IS A JOKE.
THE DECISION IS A JOKE.
THE DECISION IS A JOKE.

Industry Observer May 5, 2009

A very poor decision ACCC. You’ve always been called a toothless tiger. Now you also allow third line forcing. Why exist? The decision and the role you played in this debarcle is a complete disgrace. Shame on you - you have let the industry and consumers down.

Kerrie May 5, 2009

Will go against the grain here and call it as I see it with hopefully a balanced view.

Yes the result is “most interesting” however there are ultimately two winners and one loser here:

* Winner ONE -Yes, the customer is actually a winner here as they have their DAF waived and can run from GE.
* Winner TWO-Aussie, as they are the only ones who are able to waive this DAF to help customer viably escape from GE to a panel lender.
* Loser OUTRIGHT- Every mortgage broker in the country that is not affiliated with Aussie at this point in time because they are unable to help ONE economically proceed with TWO..

So, yes whilst I am “not happy jan” about the result, it does look like the customer can win out of this process and leave GE long gone!

There, I said it and whilst my partner and I would like the same benefit that Aussie had negotiated, WE DON’T and we also do not have any Wizard clients we need to worry about anyway and will concentrate on our own data base.

AF May 6, 2009

Customers get NO benefit at all from this poor decision by the ACCC. I know because I am a customer who has been put in a no-win situation. We took out a 95% mortgage with Wizard less than 2 years ago. Before you jump up and down about 95% mortgages, there is a reason behind it. We had been living, working, and travelling overseas for a few years. After coming home we paid cash for furniture and electricals for the unit we were renting. We then took out a loan to buy a car and paid it off in a year. With our first baby on the way, we wanted to live in a house rather than a 9th floor unit, but with rent so high, we decided we would be better off buying. We were prepared to pay LMI once only, and Wizard had a much lower variable rate than the big 4 bank$. This lower rate was the whole principle behind their business.

GE, Aussie, and CBA have sat around a table and discussed how they can suck as much money as possible out of customers after the sale of Wizard. I wouldn’t be surpised if Genworth were also involved in these negotiations. We were prepared to leave our mortgage with Wizard for many years. GE have changed the rules and the mortgage product we now have, the ACCC have made them exempt from the law because GE wrote it into the contract of sale, and we are expected to pay again to get the product we used to have. The whole deal stinks and the ACCC have proven that they are not willing to protect consumers when banks are involved. Just because a business writes a condition into a contract does not make it legal, especially when it has a negative effect on customers.

We have gone from having one of the cheapest variable rate mortgages on the market to one of the most expensive in the last 3 months. If we were to do what we really want and take our mortgage elsewhere, it is going to cost about $7000 in LMI, plus $4200 DAF, plus exit and establishment fees. We don’t have a spare $11000 - $12000! Even if we take up the DAF waiver and go to Aussie, it is still going to cost us $5500 in LMI, plus the exit and establishment fees. Again, we don’t have $6000+. GE and Aussie should have negotiated to have LMI transferred from Wizard / GE to Aussie if customers move to Aussie. The ACCC in their ruling say that competitors have the opportunity to pay our DAF to get our business. I don’t see ANY lenders looking to take on former Wizard customers as it will cost them too much. If there are any lenders out there who want to pay my DAF (and preferably LMI) please respond. I expect a deafening silence.

We were responsible in the price we spent on a house, factoring in that we would be living on 1 salary for some time, we have always made our repayments on time and in full, we have never missed a payment on anything, yet the ACCC are going to allow GE and Aussie to stuff us good and proper. There are many variable loans out there that are much cheaper than Aussie, like our Wizard loan was, but thanks to the ACCC, getting one of them is not a viable option. “At Aussie, we’ll save you”. What a load of BS.

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