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The Australian Small Business and Family Enterprise Ombudsman has welcomed the royal commission into the banking sector, calling for it to review past cases where small businesses had been unfairly treated.
Ombudsman Kate Carnell welcomed Thursday’s announcement of a royal commission into alleged misconduct in the banking industry, noting that previous inquiries this year had identified cases where small businesses had suffered from “questionable conduct”.
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Ms Carnell said: “The asymmetry in power between the banks and small businesses, together with the conduct of banks particularly since the global financial crisis in 2008, has left many small businesses in a devastating financial position. Many have lost their businesses as well as their family homes, with no prospect until now of obtaining access to justice.
“I’ve been concerned that in some cases there may have been unconscionable behaviour by the banks and this should be examined in the royal commission.”
Ms Carnell said that there had been significant progress in the past few years towards changing the behaviour of banks, including Unfair Contract Terms legislation and the establishment of the Australian Financial Complaints Authority.
“What’s been missing is the capacity to review past disputes and award compensation,” the Ombudsman said.
“It’s not acceptable that banks called in loans where repayments were up to date. Businesses were forced to close, people lost their jobs and entire communities suffered adverse impacts.
“The contract clauses were so one-sided there was no constraint on the banks to stop them foreclosing on loans that didn’t fit their risk profile.”
Ms Carnell said that the Small Business Loans Inquiry heard cases that “clearly showed banks deliberately employed systematic poor and unreasonable behaviour to terminate business loans”, and that small businesses had been “denied access to justice”.
She continued: “Many settlements occurred under duress because borrowers had little choice but to accept the bank’s offer. They could not refinance because cash resources had been drained, they were facing penalty interest and had no negotiating power.
“I hope the royal commission probes these past cases and recommends compensation for those who were unfairly treated.”
[Related: Government to implement faster payment terms for SMEs]
