Suncorp updates SME loan terms

In a bid to make the contract terms “fairer”, the bank removed the clause that previously allowed it to treat a loan as being in default due to a general or non-specified “material adverse change”.

However, there are exceptions, such as failing to pay or exceeding a facility limit, becoming insolvent, misrepresenting information, committing unlawful acts, being the subject of material creditor enforcement, losing a licence or permit, failing to maintain insurance, and changing ownership. In such cases, Suncorp will be able to treat the loans as being in default.

The clause remains in place for loans valued at more than $1 million.

Further, using financial indicator covenants as default events will no longer apply, meaning that if, for example, the value of a customer’s secured property falls, but they are still able to maintain their repayments, they will not be in default of their loan. However, exceptions apply.

Additionally, Suncorp said it will no longer rely on indemnities in contracts to claim losses that could be caused by fraud, negligence or misconduct by the bank’s employees, contractors, agents, and third parties appointed by the bank to exercise its rights as the holder of a security.

The bank has also said it reduced its ability to make changes to loan contracts at any time without the customer’s agreement. Customers will also be provided extra notice in many cases, according to Suncorp.

Australia’s big four banks were required to make these changes first, after a joint investigation by the Australian Securities and Investments Commission (ASIC) and the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) found that they “had not done enough” to bring small business loan contracts in compliance with amendments to the Australian Consumer Law in November 2016, which extended consumer protections to small business loan contracts of up to $1 million.

A spokesperson from ASIC told The Adviser sister title Mortgage Business that the regulator had sent communications to a wide range of bank and non-bank lenders in April and May as part of its continued efforts to ensure the industry is compliant with amendments to the Australian Consumer Law.

Suncorp additionally announced the launch of a new small business capacity-to-repay (CTR) calculator that it said is “streamlined and easier to use”.

The bank said the calculator, which can be accessed by logging into Suncorp’s Business Partners Online platform, was designed specifically with brokers in mind.

The new CTR calculator can be used for small business and combined small business/residential loan applications, or for existing small business customers looking to obtain residential loans.

[Related: Regulator warns SMEs to check bank loan contracts]