ANZ the first Big Four to simplify small business contracts
The announcement comes following mounting pressure from ASIC and the small business ombudsman.
ANZ has today announced additional changes to its small business loan contracts in a bid to further eliminate unfair terms. The changes follow on from a previous move by each of the Big Four to implement 11 recommendations from the Small Business and Family Enterprise Ombudsman Kate Carnell's November 2016 report on small business loans.
The new changes apply to small business loan contracts valued up to $1 million or where lending to the customer group is up to $3 million in total credit exposure.
ANZ has agreed to change default clauses and limit the instances where the breach of a financial indicator covenant will trigger a default to "specialised finance transactions". Examples of this include margin lending, self-managed super funds financing and property development.
According to Fairfax, the remaining Big Four lenders are expected to make similar announcements in the coming week but the institutions have differed on some issues.
Speaking to Sydney Morning Herald, Carnell says the banks' position demonstrates nine months of work by ASIC.
"The banks' initial underdone response to the legislation serves as a reminder that banks were once again trying to 'game' the rules and this erodes trust. It's hard to understand why all these things are like pulling teeth. It came into effect last November and it has taken my office and ASIC until now to take them to where they are pretty close to complying with a law that has been in effect for eight months," she said.
"There are now very positive signs that the big four banks are demonstrating industry leadership in embracing best practice."
New and existing ANZ customers will benefit from the changes and ANZ will notify affected customers over the coming months. According to its statement, ANZ will not "rely on or enforce any provision" in its small business loan contracts from 31 August 2017 that is inconsistent with its commitment.