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Wednesday, 01 March 2017

The Government’s Small Business and Family Enterprise Ombudsman Kate Carnell is proposing to back small businesses taking legal action against major banks over unfair conditions imposed on small business borrowers.

The Australian Financial Review reported that “Ms Carnell, in partnership with regulators, is on the lookout for a legal test case to demonstrate that it is unlawful for big businesses to use their size to bully smaller enterprises into unfavourable deals.

“No longer allowed, for example, are contract terms that allow a bank to cancel a loan with a small business borrower, but prevent the borrower doing so.”
New legislation prohibiting such unfair terms came into force last November and Ms Carnell is reviewing its operation.

"At first look, the responses of the big four banks are less than what the community would expect," she told The Australian Financial Review. "I'm pretty unimpressed. We would certainly be looking for a test case if we found that banks, or any business for that matter, had chosen not to comply." By "we", Ms Carnell means the Australian Competition and Consumer Commission and Australian Securities and Investments Commission, which are responsible for policing the rules. “

Speaking about her small business loans inquiry Ms Carnell said, ““The cases we examined during our inquiry highlighted the glaring need to ensure small business bank customers are provided with simple standard contracts that are written in plain English and that get rid of the clauses giving banks all the power.

“It’s also clear from the cases we looked at, that current thresholds governing small business external dispute resolution are insufficient, so we will certainly support work in establishing a mechanism to provide timely and affordable access to justice for cash-strapped small businesses.”

She said the ASBFEO will publish six monthly scorecards on the progress banks are making in response to the recommendations contained in the ASBFEO report.

“Since the GFC there have been 17 inquiries and reviews that have produced more than 40 recommendations over the years, relating to the small business sector. Despite this, the banks have consistently failed to implement changes to address persistent problems” Ms Carnell said.

“Frankly, the banks take ‘kicking the can down the road’ to new levels. This is no longer acceptable and I’m determined the recommendations we’ve made are adopted as quickly as possible. This report is a living document; it’s only the beginning of our work in this area,” she said.

Ms Carnell said she hopes that as industry leaders, the four major banks will seize the opportunity to be exemplars for change, saying the ASBFEO has already secured varying levels of in–principle support from the banks on a range of issues.


Click below to view source

ASBFEO Report: Inquiry into small business loans

ASBFEO Media Release: ASBFEO: Change is overdue and the banks are on notice

Australian Financial Review: Banks on notice over unfair contracts

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