Banks put screws on small busi­ness

The Chronicle - - NEWS YOUR MONEY - with Her­ald Sun se­nior busi­ness writer Ka­rina Bar­ry­more

THOSE big four banks have been at it again. Try­ing to screw the rest of the econ­omy for their own self­ish sakes.

This time it’s not house­holds and or­di­nary peo­ple. This time they are tar­get­ing our big­gest em­ploy­ers – small busi­ness.

Mess with small busi­ness and you mess with the whole back­bone of our econ­omy and our cul­ture of en­trepreneur­ship.

But, nah, the big banks don’t care. They’re short-term thinkers only.

Bank boards are will­ing to crip­ple and send our big­gest source of em­ploy­ment to the wall, just so they can earn even big­ger prof­its and bonuses.

The ex­cuses given by bank bosses, dur­ing the lat­est round of ques­tions from the par­lia­men­tary eco­nomic in­quiry, per­fectly demon­strated this self­ish­ness.

They demon­strated no un­der­stand­ing of how un­fair their tac­tics are or the pain they cause small busi­ness cus­tomers. In­stead they doggedly in­sisted that they didn’t have to care. Profit above all else.

The long-run­ning prob­lem that came un­der the spot­light at the in­quiry cen­tred on the banks’ un­fair loan con­tracts with small busi­ness cus­tomers.

They can – and they do – can­cel a small busi­ness loan when the bor­rower has done noth­ing wrong.

Yep, pull the funds out from un­der the busi­ness and de­mand the money back.

Now, you might think per­haps the small busi­ness must have missed a re­pay­ment? No.

Okay, then maybe they broke some other rule in the con­tract? No.

Hmm, what if they failed to tug their fore­lock enough or failed to pay one of the hun­dreds of other ex­tra high fees and ac­count costs that small busi­nesses are charged? No and no.

These hard-work­ing busi­nesses can do ab­so­lutely noth­ing wrong, yet the banks can de­mand the money back. Just like that.

It’s called a “non­mon­e­tary de­fault”.

And this un­fair clause says if the se­cu­rity agreed for the loan (usu­ally a fam­ily home) falls in value, then the bank can can­cel the loan.

No re­pay­ments have been missed, the busi­ness is in good health, cash flow is nor­mal, noth­ing is wrong.

But the un­der­ly­ing se­cu­rity, which the bank would have been re­spon­si­ble for valu­ing in the first place, has fallen.

And fallen, in most cases, ac­cord­ing to the bank’s re­vised val­u­a­tion.

Imag­ine the devastation this causes small busi­ness own­ers, their fam­i­lies and staff.

“It’s not il­le­gal” was the sum of their ex­cuses to the eco­nomic in­quiry, so they’re not chang­ing it.

And you might, rightly, ask what the reg­u­la­tor is do­ing while these poor small busi­nesses are pushed into the mud.

Well, noth­ing.

What a great pity our Gov­ern­ment and reg­u­la­tors con­tinue to look the other way.

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