Small Business Minister Bruce Billson is standing firm on his promise to introduce legislation to extend unfair contact laws to the way banks deal with their small business customers, despite resistance from the banking sector.
Speaking to SmartCompany this morning, Billson said the banks were “upset” and had been “quite resistant” to draft legislation introduced and supported by states last month.
“The banks are saying they have adequate protections already in place, but I am not persuaded of that,” Billson says.
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The changes, if passed through the Senate, would limit the way a bank is able to apply standard ‘take it or leave it’ contracts to small business customers and foreclose their business customers. The new laws would apply to transactions of up to $100,000 or up to $250,000 where a transaction goes over a number of years.
The legislation also applies to terms in contracts between small businesses and other larger entities, including landlords.
Billson say the provisions, a Coalition election promise, would bring the banks’ relationships with small business customers in line with relationships with consumers.
“[Banks] have said they aim to treat and respect their small business customers as if they are consumers in many of their financial relationships,” says Billson.
“That being the position, the legislation shouldn’t be a real challenge for them.”
“Our policy action is entirely consistent with that rhetoric from the banks. Therefore, I see no impediment of imposing a much welcome measure from small business.”
The Australian Bankers’ Association has argued the changes will increase compliance measures and therefore borrowing costs to customers.
But Billson says he has heard a lot of feedback from business banking customers who say banks impose unilateral variations on contract terms and reserve the right to make unfair unilateral changes on a ‘take it or leave it’ basis.
“It is damaging to small business and a way of boosting an already dominant position,” he says.
Billson says the government is working with banks and a range of stakeholders to push forward with the legislation in the coming months.