The big four banks and other lenders have been warned to remove unfair terms from small business loan contracts.
ASIC has released a report outlining the changes made by the big four banks to remove unfair contract terms from small business loans up to $1 million.
The report also provides guidance to lenders about compliance with the unfair contract terms (UCT) laws as they relate to small business. It:
- Identifies the types of terms in loan contracts that raise concerns under the law
- Provides details about the specific changes that have been made by the banks to ensure compliance with the law
- Provides general guidance to lenders with small business borrowers to help them assess whether loan contracts comply with the law
ASIC said it will monitor the big four banks’, and other lenders, to ensure they don’t breach the rules on unfair contract terms for small business loans.
The regulator also said it would work with the small business ombudsman to ensure small business loan contracts comply with the unfair contract terms law.
ASIC deputy chair Peter Kell said there were no excuses for lenders that fail to comply with the UCT laws.
Kate Carnell, the small business ombudsman, welcomed the new ASIC report.
Ms Carnell said that small business loan contracts are hard to understand – they’re often long and full of legal jargon.
“Often, small businesses do not understand the significance of what they are signing,” she said.
“We will monitor the use of the changed clauses by the big four banks, and ensure their existing applicable small business customers are aware of the changes.
“We will also continue to apply pressure on the rest of Australia’s financial institutions, to make sure they too meet the unfair contract terms legislation.”