Lenders are running the risk of having their early termination fees on mortgages declared unconscionable by not keeping adequate records, calculating costs on a portfolio (rather than an individual) basis and by failing to reduce the level of the fees over time.The Australian Securities and Investments Commission has published the results of a review of how lenders handle early termination fees. Of the 20 lenders it surveyed, it found that all were "generally aware" of their obligations in relation to early termination fees and had taken steps to ensure compliance.It said complaints arose in less than one per cent of cases where early termination fees were charged.However, it made a number of recommendations to improve standards.Lenders are not allowed to charge early termination fees on mortgages written after July 2011. However, many mortgages entered into before that date still include an early termination fee.Under the National Consumer Credit Protection Act, an early termination fee is unconscionable if the fee exceeds a reasonable estimate of the credit provider's losses arising from the early termination.ASIC said it was concerned that some small lenders suggested that it was not practical for a business of their size to devote resources to verifying the losses they sought to recover.There were cases where lenders reported losses that did not appear to be either unrecovered establishment costs or losses arising from early termination.Fifteen out of 20 lenders did not retain any discrete records of unrecovered establishment costs for the purpose of calculating losses from early termination. All lenders estimate their losses on a portfolio basis, rather than an individual loan basis, even where costs appeared to differ substantially between loans.ASIC said this practice increased the likelihood of having individual early termination fees declared unconscionable.A majority of lenders had early termination fees that did not reduce over the period that fee was payable. ASIC said a better practice would be to have the fees reduce over time.Another practice that ASIC did not like was calculating the early termination fee by reference to the loan amount. Its view is that many of the losses that arise out of early termination are fixed and do not change relative to the size of the loan.ASIC found that most lenders waive early termination fees on loans where the borrower refinances with the same lender. ASIC recommended that the calculation of any fee should take into account any reduced cost, such as internal refinancing.