Leichhardt MP Warren Entsch has welcomed news that the Small Business and Family Enterprise Ombudsman, Kate Carnell, will carry out a review into small business lending practices.
“This is a very significant first step as we look more broadly at making the banks take more responsibility for unfair activities,” Mr Entsch said. “I appreciate that Minister O’Dwyer and Minister McCormack have acted swiftly in directing the Ombudsman to take this step.”
Mr Entsch said a large number of affected small business bank clients had contacted him after his initial calls for a Royal Commission into the banks.
“I encouraged a number of these victims of bank ‘bastardry’ to present at the Parliamentary Joint Committee on Corporations and Financial Services, to share their stories,” he said.
“These stories contributed to the Joint Committee making 11 recommendations, including that of establishing a Tribunal. This acknowledged that many victims of inappropriate actions by banks and financial services end up penniless, and have no capacity to seek legal or financial retribution.”
A selection of those who presented to the Joint Committee will now be asked to present to the Ombudsman during a short and sharp 3-month review. The Ombudsman has the power of a Royal Commission to be able to compel evidence.
Mr Entsch said the Ombudsman’s review provides an opportunity to have a forensic look at particular cases and forward the outcomes of those investigations onto the Ramsay review.
“The Ombudsman will use these cases to identify any other areas that need to be addressed and feed that into the Ramsay review, which is a much broader look into external dispute resolution schemes in the financial services sector.
“This will help those in the larger review process to come up with mechanisms that will give victims of banking and other financial sector malpractice access to have their cases heard and have a determination made irrespective of their financial circumstances.
“Ultimately, it’s about whether we decide to establish a Tribunal or proceed with one of the other options.”
The Terms of Reference are as follows:
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.