Starting next month, Prospa will no longer use “unfair contract clauses” as identified by the Australian Securities & Investments Commission (ASIC).
In accordance with the unfair contract terms (UCT) legislation, these changes will benefit all customers who entered into or renewed contracts from 12 November 2016.
The Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell expressed pleasure with the development but also stated her disappointment that this development took as long as it has.
“The UCT legislation came into effect in November 2016. Small business standard loan contracts can no longer contain terms that cause significant imbalance in rights and obligations, or cause detriment to the small business,” she said. “ASIC found a significant number of clauses in the fintech’s contract that required changes.”
In a survey carried out by ASBFEO, FinTech Australia and theBankDoctor.org earlier this year, only 50 per cent of the fintech’s surveyed considered their contracts compliant with UCT legislation. In addition, ASIC published last March its report which outlined clauses that would be deemed to be unfair.
“The message here is very simple – don’t use unfair contract terms. ASIC has made it clear that it will consider regulatory action,” Carnell said. “We urge all lenders to small business to remove clauses outlined in the ASIC Report 565 from their standard form loan contracts.”