The big four banks are set to implement small business loan contract reforms, following a regulatory investigation into unfair contract terms.
An Unfair Contract Terms and Small Business Loans report released by the Australian Securities and Investments Commission (ASIC) has outlined changes to be implemented by Australia’s major lenders, following an investigation by the regulator and the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
The investigation found that the big four banks “had not done enough” to bring small business loan contracts in compliance with amendments to Australian Consumer Law in November 2016, which extended consumer protections to small business loan contracts of up to $1 million.
Changes to be made by the major banks include:
The report has noted that the banks will contact borrowers to inform them of the changes. ASIC will also monitor the banks’ implementation of the reforms, and it will investigate unfair contract terms issued by other lenders.
“ASIC will review small business lending contracts across the market,” ASIC deputy chair Peter Kell said. “There are no excuses for failure to comply with the [unfair contract terms] laws, and we will consider all regulatory options available to us if we identify lenders whose unfair contracts break the law.”
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