THE Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has questioned Commonwealth Bank’s commitment to small business lending reform following evidence to a parliamentary select committee.

Ms Carnell said it was good that banks have finally committed to complying with unfair contract terms legislation, but the lending threshold should be $5 million instead of the $3 million they have agreed.

At the Select Committee on Lending to Primary Production Customers in Sydney on August 11, the Commonwealth Bank spokesman said:

"Certrtainly, insofar as the discussions we had with Ms Carnell, we had a debate and a discussion around that. We feel that $3 million is a lot of money. Beyond $3 million, it is starting to get into a very serious amount of exposure. We are very mindful that, obviously, as we lend more money, the risk to our organisation increases in absolute terms. The higher you push that threshold, one of the unintended consequences could be that the banks start to withdraw from the market. Why we feel $3 million is appropriate is that it tries to strike that right balance to achieve for the small business customers and provide greater certainty but also does not have the intended consequence of withdrawing liquidity from the small business market.”

Ms Carnell accused CBA of scaremongering.

“Despite repeatedly asking, we have never received a properly justified explanation of why $5 million is such a problem, even when they have acknowledged that this is a very small percentage of small business loans (above $3m),” she said.

“Threatening to withdraw liquidity from the small business market is a sledgehammer approach that’s farcical and has no justification given the low number of small business loans involved in going from $3m to $5m.”

Ms Carnell said the banks’ own independent expert adviser on the ABA Code of Banking Practice review, the Financial Ombudsman Service and the Government’s response to the Ramsay review on external dispute resolution had all identified a credit facility of at least $5 million as an appropriate threshold.

“By their evidence to the committee, CBA is suggesting that ethical values and best practice don’t apply above a reasonable limit, which is absurd,” she said.

“We’ll be talking to the government, opposition, crossbench MPs and the banks about raising the threshold to $5 million, which is appropriate for capital intensive small businesses and family enterprises such as farms.”

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CHANGES in bank contracts with small business people would boost the economy and be a feather in the ombudsman’s small business cap, according to the Council of Small Business Australia (COSBOA).

COSBOA today congratulated the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) and her staff, as well as the Australian Bankers Association on a ground-breaking agreement for processing contracts and inclusions for small business people.

Peter Strong, CEO, COSBOA commented on the impact of these changes for small business people ahead of the Vodafone National Small Business Summit which takes place this week, 23-25 August in Melbourne.

“It’s taken longer than it should have done, but the big four banks have finally agreed to eliminate unfair terms from their contracts. Small business people are now safe from banks unilaterally changing loan contracts. Good on the banks," Mr Strong said.

“Unfair contracts legislation came into effect in November last year and banks were very slow to comply. But thanks to the work of Ombudsman Kate Carnell and her team, there are now important protections for small business customers,” said Mr Strong.

COSBOA notes that banks can no longer call in a default for an unspecified negative change in circumstances of a small business customer. In addition, banks are now able to vary contracts only in specific circumstances.

“These are basic rights that individual customers have had for a long time. It was unfair that small business people were at the mercy of decision from banks that were able to do whatever they wanted, whenever they wanted. The changes are a positive step for business and for the health of our economy,” added Mr Strong.

“The other big change is the new maximum threshold for the changes to take effect which is now $3 million, well up from the $300,000 set for other contracts. This is much more reflective of the real situation in the small business finance space, we do not want to appear greedy, we’d like it to be $5 million, but $3 million is a great leap forward.

“It is important that we acknowledge the work of the Australian Bankers Association who have supported changes in contract inclusions,” concluded Mr Strong.

Finally, it is worth noting the presence of an Ombudsman for small business people, along with the State Small Business Commissioners, has not had a negative impact on big business but indeed has had a positive impact on small business people and the economy. 

It is interesting that all the staff of the Ombudsman and commissioners understand small business as people and its wider importance to the economy. Not many agencies have that situation as there always seems to be some ideologue, or some 1990s laissez-faire economist in other government agencies who hold back progress and good regulation.

Kate Carnell, Australian Small Business and Family Enterprise Ombudsman; Judy O’Connell, Victorian Small Business Commissioner and Anna Bligh, CEO of Australian Banking Association will speak at the Vodafone National Small Business Summit, 23-25 August 2017 at the Events Centre Collins Square, Melbourne. 

Registrations are open for the Vodafone National Small Business Summit. For more information please visit: www.cosboansbs.com.au  

#NSBS17

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THE Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has welcomed new data which shows that late payment performance is beginning to improve.

The latest Dun & Bradstreet report shows that late payments fell during the second quarter of 2017 by 4.6 percent, while prompt payments rose sharply.

On average, 63.8 percent of Australian businesses paid their bills on time.

However, just 12 per cent of ASX-listed companies pay on time compared with almost 34 percent of non-ASX-listed companies.

“This is very disappointing as public companies should be leading by example,” Ms Carnell said.

“It’s pleasing that some progress has been made since the ASBFEO inquiry into payment times and practices reported in March but more needs to be done.

“One of the biggest issues facing small business is delayed payments by big business and governments.

“Cash flow is king to small business; late payments can be the difference between success and insolvency.

“Overseas jurisdictions have demonstrated that faster payments through supply chains will free up cash flow and stimulate investment, jobs and growth.”

Ms Carnell said the Dun & Bradstreet report also reveals that Western Australia has the slowest payment times and the worst-performing sectors are wholesaling and manufacturing.

She said ASBFEO is developing a National Payment Transparency Register to publish businesses payment times and practices rated against a benchmark for good and bad performers.

The Business Council of Australia has established the Australian Supplier Payment Code – a voluntary, industry-led initiative.

For government payments, Ms Carnell said she would continue to push for 15-day payment terms.

“I’m encouraged the NSW Government has undertaken to investigate this,” she said.

View the Dun & Bradstreet report online.

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