Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell today met with House of Representatives Economics Committee chair David Coleman MP, to discuss in detail the findings of the ASBFEO’s Small Business Bank Loans Inquiry, ahead of the next round of bank hearings in March.
During the briefing, the Ombudsman raised her deep concerns regarding the unwillingness of the banks to abide by new laws governing unfair terms in standard form contracts with small businesses.
“The legislation that took effect last year outlawing unfair and one-sided standard form contract terms presented banks with the opportunity to create contracts that could first and foremost be easily understood, and secondly, be fair for small business customers,” Ms Carnell said.
“What we found through our inquiry process was that the banks did pretty much the opposite and only made minor changes around the edges; for example, one bank changed their terms and conditions from: ‘requiring customers to do anything the bank asks,’ to ‘doing anything the bank “reasonably” asks’. This is hardly enough to make an unfair contract fair.
“The banks have spent a lot of money advertising the fact that they’ve heard the message from customers and that they’ve changed their ways. Well, if their collective response to the unfair contract terms legislation is anything to go by, I question whether their claims have any substance, or whether it is just a slick PR campaign.
“We’re now working actively with ASIC – as well as the Economics Committee – as they review the banks’ response to the unfair contract terms legislation more fully. Meaningful change in this space is a priority for us and we will relentlessly pursue real reform to ensure fairness for small business borrowers going forward,” she said.
Ms Carnell said the ASBFEO office will also be working with the Ramsey Review panel as they examine the financial system’s External Dispute Resolution (EDR) and complaints framework.
“What we found in our inquiry was there’s an urgent need for a non-judicial process to address retrospective cases of injustice by the banks,” Ms Carnell said.
“It’s pleasing to see our findings have now been incorporated in the Ramsey Review ‘Terms of Reference’, and we will of course contribute to the panel’s ongoing work to ensure there’s a low-cost mechanism in place to properly address past, present and future cases of small business mistreatment by their bank lender,” she said.