The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has encouraged small businesses that have suffered from ‘questionable conduct’ by the banks to tell the Royal Commission into misconduct in the banking industry, now underway.
Regarding the Royal Commission, Carnell told Dynamic Business that she’d like to see small businesses share examples of “scenarios where they have complied with their side of a loan agreement only for the bank to change the rules, impacting their finances – even sending them broke.”
She continued, “We want small businesses to speak up if they believe they’ve been misled by a bank. For instance, if they have entered into a contract and financially committed to a particular course of action only to discover the terms and conditions weren’t what the bank led them to believe.”
Carnell said the Royal Commission was also a forum for small businesses to report instances where, to their detriment, a bank changed the terms and conditions of a contract during the period of the loan.
“For example, a bank might revalue an asset and – based on the revised valuation – either require the business to suddenly make significantly higher repayments or require repayment of the loan within a very short time frame, say two weeks,” she explained.
“We’ve seen cases where a business made their loan payments on time only to have their loan moved into default and the interest rate doubled.
Additionally, Carnell said the Royal Commission should also be made aware of instances where small businesses were “assured a loan would be given or rolled over only for the bank to change its mind at the last minute, perhaps even when they arrived to sign the contract.”
She advised small businesses not to miss out on an opportunity to “tell their story” to an independent entity.
“Let’s be honest, it would be a very bad mistake for a small business to take a bank to court,” she said. “Banks have long timelines and very deep pockets whereas small businesses don’t. If you have any money when you take a bank to court, you won’t for very long. That’s why it’s very important for businesses to put forward their case to the Royal Commission and highlight the consequences of banks using their power unfairly.”