Information disclosure: Prepayment fees
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| Q.3 What are your views on increasing the disclosure required for prepayment fees? Is your preference for an "alert", for example, a matrix of possible scenarios, or detailed estimates? Will disclosing full information on potential break fees across various timelines and a range of differing interest rates provide a more useful basis than an "alert" on which to inform the lending decision? Will provision of such information crowd out other relevant disclosure information? |
Consumer representatives expressed strong support for the disclosure of information (an alert) about prepayment fees. It was noted, however, that too much information could overload a borrower, although one submitter suggested it was more important to have the possibility of overload rather than no information being provided.
The banking industry generally noted the CCCFA already requires disclosure to the consumer that prepayment fees may be charged under the credit contract and to provide a means for their calculation.
A couple of banks said they provide more than the minimum requirements, expressing their support for increased information disclosure in this area.
It was suggested that the recent media concerns were brought about due to consumers not being acquainted with the risks of fixed interest loans and thus perhaps the issue was one of financial literacy. In this context, the use of additional information was further queried, as it would not address financial literacy shortcomings and the information could also distract the borrower from more critical information that is required to be disclosed.
Other lenders tended to acknowledge disclosure was useful but did not generally support the disclosure of more information, again concerned about too much information confusing borrowers. Industry groups also expressed similar sentiments.
