Thursday, March 23, 2017 - Posted by Michael McCulloch
The Australian Securities and Investments Commission
("ASIC") and the Australian Small Business & Family Enterprise Ombudsman
("ASBFEO") have recently met to discuss unfair Contract laws.
The review of small business loan contracts offered by Australia's big 4 banks were found to not meet their new obligations under unfair Contract Terms ("UCT") legislation depsite being provided with a 1 year transition period ahead of the November 2016 implementation deadline.
Both ASIC and the ASBFEO have advised that lenders need to take immediate steps to ensure compliance with the new legislation and must immediately:
- Prohibit non-monetary default clauses where the borrower is meeting their Contractual obligations;
- Provide at least 90 days notice where a loan facility will not be extended; and
- Provide more comprehensive access to external dispute resolution schemes.
ASIC Deputy Chair, Peter Kell, said in a statement, "ASIC is committed to ensuring the UCT provisions help to raise small business lending standards. Where we identify a potentially unfair term we will work with the lender to remove or amend the term, and we have already started to raise these issues with lenders. If the lender refuses to do so we will consider all regulatory options, including taking the matter to court as ultimately a court can decide whether or not a term is unfair
Kate Carnell of the ASBFEO said in a statement, “I’m firmly of the belief that the loan contract terms as they currently stand, fail to comply with the UCT law. Once again, repeated calls for the banks to amend their practices are falling on deaf ears, despite inquiry after inquiry highlighting major flaws in the way they treat their small business customers
Read a copy of the ASIC Information Sheet 211
Unfair contract term protections for small businesses (INFO 211).
Alternatively read a copy of the amendments to the Australian Securities and Investments Comission Act 2001 via the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (no. 147, 2015) – Schedule 1 – Amendments here