ACCC, APRA and ASIC war over bank gouging

Via Banking Day:

The Australian Competition and Consumer Commission has called out the big banks for gouging an extra $1.1 billion a year from thousands of interest-only borrowers, but has baulked at recommending action to fix the problem.

The four major banks controversially repriced their interest-only back books by an average of 32 basis points in June 2017 and claimed they were forced to do it by a restrictive lending policy imposed on them by the Australian Prudential Regulation Authority.

However, the justification stumped up by the banks was misleading because APRA’s restrictive benchmark for growth in interest-only mortgages was directed at limiting such lending to new borrowers only.

In its final report on residential mortgage pricing released yesterday, the ACCC found that the banks used the cover of the APRA’s regulatory intervention to slug existing interest-only borrowers with higher rates.

But, also at Banking Day:

There’s at least one gaping question that the ACCC carefully sidestepped during its 18-month inquiry into residential mortgage pricing in Australia.

While one of the competition watchdog’s key findings was that the four major banks exploited APRA’s move in 2017 to cap growth in new interest-only lending, the ACCC failed to ask why the prudential regulator did not take precautionary measures to ensure that existing home borrowers were protected from unnecessary rate hikes.

The question should have been addressed in the final report of the ACCC inquiry given that the 30 basis point rate increases are now baked into the expense columns of thousands of household budgets.

Even though the ACCC found that those rate increases added A$1.1 billion to interest revenue collected from gouged borrowers last year, it offered no recommendations to government on how the repricing could be remedied or prevented from happening again.

The bottom line is that the ACCC dropped the ball.

As said many times, we need a new inquiry to sort out which regulator is responsible for what and when.

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