SMBs

Australia Unlikely To Expand Borrower Protections To SMBs

australia-small-business-loans

Business lending in Australia probably won’t face tougher loan regulation when it comes to small business loans.

“The evidence and submissions provided to the commission did not reveal any great appetite to change the legal framework,” Commissioner Kenneth Hayne said in his interim report, according to the Australian Financial Review. “In particular, I did not understand there to be substantial support for changing the legal framework in ways that would bring some or all SMEs within the application of the NCCP Act,” which is a reference to the National Consumer Credit Protection legislation.

He went on to describe “the central and perhaps irreplaceable role played by guarantors in securing small business finance and the particular vulnerability of small businesses to failure.”

In addition, senior counsel assisting the commission, Michael Hodge, QC, explained that while the relationships between business borrowers and banks are “almost always complicated,” he added that they are “intertwined with the operation of the business and often also the personal financial situation of the individual or individuals behind the business.”

The banking and financial services Australia royal commission released its interim report late last week, covering consumer lending, financial planning, business lending, farm finance and Indigenous finance.

The commission also aimed to address the poor conduct by financial services firms — not only trying to find out why it had occurred, but also how to stop the behavior from repeating.

Hayne revealed that, in many cases, the reason for the bad behavior was simple: “Too often, the answer seems to be greed — the pursuit of short-term profit at the expense of basic standards of honesty,” he wrote, according to ABC News in Australia. “How else is charging continuing advice fees to the dead to be explained?”

But instead of making recommendations, the report pondered if better enforcement of the law, as well as a simplification of those regulations, would help enforce it more effectively.

“Much more often than not, the conduct now condemned was contrary to law. Passing some new law to say, again, ‘Do not do that,’ would add an extra layer of legal complexity to an already complex regulatory regime. What would that gain?” the report asked.

 

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