Following pressure from ASIC and the Australian Small Business and Family Enterprise Ombudsman, the big four domestic banks have agreed to remove unfair terms from their contacts with small businesses, covering loans up to A$3million.
Clauses no longer included in loan documents include ‘entire agreement clauses’, meaning banks are no longer absolved from agreements and commitments made to borrowers outside the written contract. ‘Material adverse event clauses’ enabling banks to terminate the loan for unspecified negative change in the circumstance of the small business customer will also be removed.
Indemnification clauses will be significantly limited.
The ombudsman has described NAB as taking an “industry leading position” in relation to the application of non-monetary default clauses, while the CBA has been recognised for providing 90 calendar days’ notice for any changes to loan contracts that the small business customer does not wish to accept.