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Like naughty schoolchildren, banks now complying with unfair contract laws

Thursday, June 01, 2017

Readers might recall our news alert headline, “we’ll only do what we’re made to do!” This was a senior counsel from one of the banks responding to our efforts about eight years ago asking them to support the unfair contract laws.

Then in March this year we said that NAB was trashing its own small business brand because it had, in our view, lied about changing its small business contracts to comply with the now operational unfair contract laws.

The huge news, however, is that last week the big four banks changed their small business overdraft contracts to comply with the laws. Robert Gottliebsen reports that the banks have:
  • Removed terms that absolve the bank from responsibility for their conduct.
  • Removed terms that gave banks total power to call a default when the value of secured property falls.
  • Removed terms that gave banks the power to call a default for an unspecified negative change in the circumstances of the small business customer.
  • Significantly limited terms that protect banks against losses outside the control of the small business borrower.
  • Significantly limited terms which gave the bank the ability to change the contract at will and without permission of the small enterprise.
But did the banks do this because they wanted to comply with the law? Well, the fact is that the head regulator, ASIC, forced them to comply. Robert Gottliebsen also recognizes the important role of Small Business Ombudsman, Kate Carnell and us, Independent Contractors Australia in achieving the outcome.

But now, according to the AFR, the banks are complaining that Federal Treasurer Scott Morrison is being too aggressive toward them. Um! As Morrison has said of the banks, ‘cry me a river!’ The banks have been like bullies in the schoolyard throwing sand at the little kids. The school principal has made them behave. So the banks have gone to their mommas on the school parents’ committee complaining that their little (bully) boys are being picked on! Spare us all!

The banks need to grow up! It’s their behaviour that is damaging themselves. But we also agree that there’s danger of political overreaction. The banks need to focus on a well functioning market economy and not their obsession with securing rorted advantage for themselves. If the banks do this, we might achieve important economic reforms!    


Postscript: In November last year we said on ABC TV, The Business, “this is not something they (big business) can ignore!” 

 

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