The Australian Small Business and Family Enterprise Ombudsman has been directed by the Turnbull Government to undertake an inquiry into the adequacy of the law to address concerns raised by the Parliamentary Joint Committee on Corporations and Financial Services in its report, Impairment of Customer Loans.
Minister for Small Business Michael McCormack said the Ombudsman will examine selected cases identified by the Parliamentary Joint Committee and, pursuant to the attached terms of reference, provide advice to Government to help determine if further regulatory action is required.
“The Parliamentary Joint Committee raised serious concerns about how banks treated some of their small business lending customers and made a number of recommendations to address the deficiencies they identified,” Minister McCormack said.
Minister for Revenue and Financial Services Kelly O’Dwyer said the Government has a substantial financial system agenda to improve consumer outcomes, however the Ombudsman will be able to identify through a forensic analysis if further reforms are needed.
“The Government’s reforms include extending the unfair contract terms protections to small businesses, and improving the regulation of insolvency practitioners,” Minister O’Dwyer said.
The Australian Small Business and Family Enterprise Ombudsman has extensive powers to review matters affecting small business and to make recommendations to prevent small business lending customers being abused.
The Ombudsman will provide interim findings to the Ramsay Review to inform the wider review of external dispute resolution schemes in the financial services sector.
The final report is due to be reported to the Government in 12 weeks.
Terms of Reference
In undertaking the inquiry, the Ombudsman should:
- review a selection of the cases that have been identified by the PJC as unfair and ascertain whether there are any deficiencies in the regulation of authorised deposit taking institutions in lending to small business;
- refer any matters identified in the review to the relevant authority for further consideration as necessary;
- determine whether the regulatory deficiencies identified by the PJC, or additional deficiencies identified through the inquiry, are being addressed by subsequent Government and industry reforms; and
- recommend whether additional reform measures should be implemented (legislation, regulations, guidance and practices) to ensure products perform in the way they should, taking into account that consumers have a responsibility to accept their financial decisions, including market losses, when they have been treated fairly, and any impact on the availability and cost of credit to small business.