It’ll be an end to hidden surprises for NAB business customers, with the bank introducing shorter plain English loan contracts for its small business borrowers.
It is expected that over 130,000 small business owners will benefit from the change which will see contract pages slashed and one-third of existing terms and conditions discarded.
NAB Executive General Manager Business Direct and Small Business Leigh O’Neill said the bank was listening and responding to customer needs and making banking simpler and fairer.
“It’s a complete transformation – what we have now is a transparent, user friendly document that is easy to read and much shorter in length. Sentences are in plain English, without unnecessary complexity,” O’Neill said.
NAB consulted widely with industry and customers to ensure new loan documents contain language that makes sense.
“Our commitments to customers are set out very clearly- we promise to act fairly and responsibly. Our customers ask us to back them in the moments that matter- these new contracts demonstrate that we’re in this journey together.”
The move comes off the back of a December 2016 inquiry into Small Business Loans which recommended changes be implemented by the banks by July 2017.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell has welcomed the move by NAB, describing it as a positive step.
“The inquiry report recommended that where a small business had met loan payments and acted lawfully, the bank must not default a loan for any reason,” Carnell said.
“The report also said conditions must be removed where banks could unilaterally value existing security assets during the life of a loan, and not invoke financial covenants or catch-all ‘material adverse change’ clauses.
Carnell suggested current loan conditions are one-sided and unfair.
“It shouldn’t have taken so long, but we finally have a situation where banks will be treating small business clients as partners and share some of the risks. Currently, the contractual relationship is one-sided and unfair.”
“I applaud NAB for being first off the mark and urge other banks to follow,” Carnell said.
NAB Chief Legal & Commercial Counsel Sharon Cook said NAB is working with the wider banking industry, ASIC and customers to address the concerns raised by Carnell’s inquiry.
“The importance of a simple and fair contract cannot be underestimated. We’ve been simplifying across all areas of the bank and these changes are industry-leading,” Cook said.
With 69 per cent of SMEs citing that dealing with red tape takes a lot of effort, freeing up the capacity of business customers to spend more time on innovating and growing is a key focus for NAB.
“SMEs say dealing with big companies and the complexity of having multiple definitions for the small business sector makes it tough for their business to succeed. That’s why we continue to call on all levels of government and the business community to take action on establishing a single, clear definition for small businesses,” said O’Neill.