ABA criticises Coalition's small business proposal
The Coalition’s proposal to extend protections against unfair contract terms to small businesses could result in more risk for banks and higher costs for businesses, according to the Australian Bankers’ Association (ABA).
A joint statement by Federal Opposition Leader Tony Abbott and the Shadow Minister for Small Business, Bruce Billson, stated that the Coalition Government would extend the unfair contract protections available to consumers to small businesses, “recognising that smaller enterprises may also be subject to ‘standard form’ contracts on a ‘take it or leave it basis’ with no opportunity to vary the terms and a significant imbalance in the parties’ rights and responsibilities”.
They asserted that Labor had originally included business-to-business contracts up to $2 million in value in the unfair contracts laws, but then broke its promise.
However, the ABA’s chief executive, Steve Münchenberg, stated that the Coalition’s proposal could be counterproductive as it could increase the risks banks face when lending to small businesses.
“A fundamental principle of contract law is certainty of contract,” Münchenberg said. “This principle is an essential element of all commercial transactions because it allows the parties to adequately allocate and price risk.
“The proposal affects business standard form contracts, which form the base of banks’ contractual arrangements to ensure certainty of compliance with laws affecting banks and management of risk, especially credit risk. It could result in increased risk for banks and higher costs for businesses.”
He added that the extension of the protections to small businesses could ultimately affect credit availability to the sector.
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