Bank of Queensland has been stung in the Federal Court over ‘unfair’ terms in its small business contracts.Source:News Corp Australia
A major Queensland bank used “unfair” contract terms when dealing with loans for small businesses, a court has ruled.
The Federal Court issued the stunning judgment against Bank of Queensland (BOQ) on Thursday after Australia’s corporate regulator sued the bank in 2019.
The Australian Securities and Investments Commission (ASIC) argued the terms caused a “significant imbalance” in the rights and obligations of people entering the contract and they caused “detriment” to small businesses if relied on.
The unfair terms were outlined in standard form loan contracts BOQ entered into with its small business customers after November 12, 2016.
Some of them included clauses that allowed the bank to vary the terms and conditions of contracts without giving borrowers advance notice or a proper exit opportunity.
The Federal Court declared multiple terms outlined in Bank of Queensland standard loan form contracts void as they were ‘unfair’ to small businesses.Source:News Corp Australia
Others included an ability to call defaults “based on events that did not present an material risk” and indemnification clauses that allowed BOQ to make claims against customers caused by their own mistake or negligence.
The court declared the unfair terms void from the start of the contracts.
Justice Katrina Banks-Smith ordered they be replaced with new terms agreed by the parties in all standard form contracts from November 2016.
She said the declarations were appropriate as they would deter other corporations from similar conduct.
ASIC commissioner Sean Hughes said it was a timely reminder for insurers to review their contracts for fairness.
“Small business owners deserve to be able to enter into fair loan contracts, especially where they have little or no ability to negotiate the terms,” he said.Internet Explorer Channel Network