Two major Australian banking institutions have been sued by the Australian Securities and Investment Commission for allegations of the use of unfair contract terms.
Bendigo and Adelaide Bank and BOQ have been taken to the Federal Court by the watchdog who alleges that the banks used contract terms with small businesses that were unfair.
ASIC alleges that the clauses give lenders, but not borrowers, broad discretion to vary the terms and conditions of the contract without the consent of the small business owner, along with clauses that allow the bank to call a default, even if the small business owner has met all of its financial obligations.
The watchdog is seeking a decision from the Federal Court that would mean these alleged unfair terms are declared void from the outset and not from the time of the court's declaration.
The remainder of the contract would remain intact and valid so long as it can continue to operate without the alleged unfair terms.
"Small businesses, like consumers, are often offered contracts for financial products and services on a 'take it or leave it' basis, commonly entering into contracts where they have limited or no opportunity to negotiate the terms," says ASIC.
"These are known as 'standard form' contracts. Small businesses commonly enter into these 'standard form' contracts for financial products and services, including business loans, credit cards, and overdraft arrangements."
Shares in BOQ are down 1.43 per cent to $8.94 per share at 11.16am AEST.
Business News Australia
Get our daily business news
Sign up to our free email news updates.