GE seeks clearance for third line forcing

GE Capital, through its solicitors Mallesons Stephen Jaques lodged a "notification of exclusive dealing" with the Australian Competition and Consumer Commission on 25 February, a week after news emerged of the company's plan to offer selective relief to home loan customers who refinance through Aussie Home Loans.

Wizard, a subsidiary of GE, has since the beginning of March offered to waive the break fee on home loans when a customer seeks to refinance - as they may well do since GE has refused to reduce interest rates in line with market prices over the last month.

Funding costs are cited as the reason GE must want to liquidate its $10 billion home loan book in Australia quickly, and it has set the pricing to speed this up.

Under an agreement between GE (the owner of Wizard Home Loans) and Aussie Home Loans, a Wizard customer is free to place the business with any lender (using Aussie as a broker), but Aussie must handle the placement and thus earn the lender's commission. Aussie will also seek to transfer mortgage insurance under the existing Wizard loan, providing a further saving. This offer will last for one year.

Home loan customers with GE who sourced their loan through a mortgage broker will also receive an offer to waive the break fee, this time without restrictions. They may refinance with whomever they wish. This group of customers has three months to take advantage of the offer.

If a Wizard customer wants to refinance using the services of another broker and avoid the break fee they will need to be assertive enough to ask for this.

The notice from GE's lawyers ritually asserts that the conduct "does not constitute exclusive dealing" but goes on to request "protection against any argument to the contrary".

GE's lawyers wrote that there would be "no lessening of competition" from this conduct, but noted that the conduct was a condition of the sale of Wizard to Aussie and was needed to "obtain the benefit of the goodwill".

Around 40,000 customers of GE are affected, which must be the entire home loan customer base of the company.