Starting Thursday this week, the Australian Securities and Investments Commission (ASIC) will be granted the authority to void skyrocketing loan exit charges that are not directly related to expenses banks actually shouldered in closing accounts benefiting consumers and homeowners.

A couple of years after Treasurer and Deputy Prime Minister Wayne Swan made a promise to make home loan switching smoother, the process will now be a reality, which aims to give the Australian consumer more aid in battling the financial crises.

Mr. Swan's bold loan switching program revealed in early 2008 had little to show before, and its
showings only amounted to a website, a hotline that forwarded callers to the , and a new requirement for loaners to give a list of debits to for other lenders to their customers.

However, Chris Bowen, Minister for Financial Services, said, banks could still recover from expenses incurred from borrowers who close accounts early but would not be able to "gouge" anymore.

The new credit law for consumers will grant the ASIC the authority to erase''unconscionable'' fees, aside from being able to erase the "unfair" ones as well.

Mr. Bowen added that he even considered granting ASIC the authority to revise contracts, however he was informed that this move is unconstitutional.

''It would have removed existing rights and almost certainly invited a constitutional challenge with a reasonable likelihood of success,'' he remarked.

''But I do think we will see behavioural change affecting existing contracts. I wouldn't overstate it, but I think the increased attention and the likelihood of public opprobrium will improve the way lenders treat the customers they have.''

Some of the exit fees to be cut are high, some even amounting to more than $5,000, according to InfoChoice. Some even charge a "deferred establishment fee" worth several thousand dollars as well.

However, some banks, like the National Australia Bank (NAB), were enthusiastic about the new credit law for consumers.

"If these new laws give Australians more power to walk down the road and find a better deal, that's a great thing," NAB Chief Executive Officer Cameron Clyne commented. "It'll be good for competition and good for lenders like us who offer the most competitive rates."

Nevertheless, the Bankers Association was prudent with the new law's outcomes, claiming that some of the exit charges actually benefited borrowers.

"'Some fees reflect the real costs of closing accounts and others are deferred establishment fees which can actually help borrowers who would otherwise have to pay upfront," remarked Steven Munchenberg, the Bankers Association's CEO. "One way or another, banks have to charge for setting up accounts."

However, Jenny Mack, Choice's chairwoman, a consumer group, argues that the new law would actually benefit the market as a whole, making the loan process smoother and amenable to both parties involved.