So ABN’s for a day got the green light as a new rort on 11 December 2006!
Change is Overdue & Banks now on Notice
http://redlandplusmore.com.au/change-is-overdue-banks-now-on-notice/
The inquiry into small business loans by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell, has found the big four banks consistently engage in practices that have caused significant harm to some small business customers.
The ASBFEO inquiry – completed in just over three months – investigated the circumstances surrounding a number of cases of alleged small business mistreatment by the banks, and concluded loan contract arrangements between banks and small businesses, put the borrower at a distinct disadvantage.
MS Karnell says the investigation found that small businesses who take out a loan, do so under the impression that if they keep up their payments, they will stay out of trouble.
“The reality is that this is not the case; that the clauses contained in standard small business loan contracts give banks an inordinate level of power over the borrower, who has zero ability to do anything about it.”
“Basically, the terms in these contracts allow the bank to take action to protect itself from financial risk, by inflicting added demands on the borrower.”
She says there are many examples – Banks may conduct a new valuation on the assets securing the loan, Banks also have the power to unexpectedly call in the loan, and demand repayment in an unrealistic timeframe.
Ms Carnell says under the re-valuation clauses if the value is found to have fallen, the borrower faces significantly increased – and potentially unmanageable – loan costs
“So what ends up happening is that through no fault of their own, small businesses could quickly find themselves in default, even though they’ve made each loan payment, on time, every time.”
“The banks argue that they don’t use these contract clauses, however our inquiry found this is simply not true.”
Ms Carnell said the ASBFEO report outlines recommendations that can be implemented – many in a short timeframe – to help alleviate the vulnerability of small business borrowers.
The Ombudsman says there’s a glaring need to ensure small business bank customers are provided with simple standard contracts that are written in plain English and that get rid of the clauses giving banks all the power.
“It’s also clear from the cases we looked at, that current thresholds governing small business external dispute resolution are insufficient.”
ASBFEO will now publish six monthly scorecards on the progress banks are making in response to the recommendations contained in the ASBFEO report.
Since the GFC there have been 17 inquiries and reviews that have produced more than 40 recommendations over the years, relating to the small business sector.
Despite this, the banks have consistently failed to implement changes to address persistent problems.
“Frankly, the banks take ‘kicking the can down the road’ to new levels. This is no longer acceptable and I’m determined the recommendations we’ve made are adopted as quickly as possible. This report is a living document; it’s only the beginning of our work in this area.”