The government's ban on exit fees will remain in place for 1 July, after a motion to overturn the ban in the Senate failed to pass yesterday.

Following weeks of intense industry lobbying, the Senate failed to pass the motion, which sought to overturn amendments to the National Consumer Credit Protection Act which will outlaw exit fees.

The failure to pass the motion means as of 1 July, lenders will no longer be able to charge any exit fee upon termaination of a loan contract, as per an earlier amendment to legislation by the government.

The vote was tied at 35 for, and 35 against the motion, with Senator Steve Fielding and the Greens deciding to vote with the government.

The vote represents a blow to industry associations and key non-banks and mortgage managers, which have engaged in months of intense lobbying. Recently, the MFAA and industry directed a national advertising campaign directly at Senate members, in the hope the ban would be overturned.

Speaking with Australian BrokerNews following yesterday's defeat, MFAA CEO Phil Naylor admitted that "the fat lady has apparently sung" on the issue of the exit fee ban.

Naylor said feedback from the Greens indicated that the party was sympathetic to the industry's concerns about lack of competition, but thought that perpetuating exit fees was the wrong policy.

However, Naylor said the Greens had been interested in arguments regarding non-bank lender funding, and had told the MFAA they would seek further reforms to improve non-bank access to finance.

Naylor has vowed not to give up on the funding issue. "The concerns about lack of competition are still strong, and we will continue to push the funding issue - for example, the Canadian Mortgage Bond system - hopefully with the support of groups like the Greens," he said.

Naylor added that his discussions with non-bank lenders showed that they will continue to "find innovative ways to ensure they remain a competitive force in the industry".

Most non-bank lenders have already adjusted their DEF and commission payment structures to cater for the ban from next week.