The newly established Australian Financial Complaints Authority (AFCA) is bringing on a small business ombudsman to look after the small end of town.
Speaking to SmartCompany, AFCA chief executive David Locke says he believes a dedicated ombudsman will expedite dispute resolution for SMEs.
“As an organisation, we need to have much more expertise and much more understanding around how small business operates and what the issues for small business are,” he says.
AFCA, which has only been open for business for two weeks, is looking to substantially improve the financial services regime for small business after years of complaints about abuse of power by the big banks.
It is the primary body dealing with complaints lodged under the 2019 Banking Code of Practice: the Australian Banking Association (ABA) code of conduct that regulates most small business lending.
Locke says he hopes to have a candidate with “extensive small business experience” locked into the new role by the end of the year to act both as a cop on the small business beat and in outreach and consultation.
The hope is a tailored avenue will be created for SMEs that is capable of addressing complaints in a timely fashion.
“[Financial complaints] can be a matter of life or death for small business, and cashflow is so critical that it’s no good determining matters if it takes 12-18 months,” Locke says.
Both Australian small business and family enterprise ombudsman Kate Carnell and Council of Small Businesses of Australia (COSBOA) chief executive Peter Strong support the move.
“We envisage a small business expert will be appointed, which will significantly improve small businesses’ access to justice and save them time and money,” Carnell said in a statement.
Access to justice is a hot-button issue for SMEs that Carnell is currently preparing a report on.
The ombudsman told Senate estimates last month the average cost of civil disputes for surveyed small businesses is $130,173.
“For small businesses, the current system is incredibly expensive and is used by some big businesses in a way that inevitably makes the small business either go broke or pull out,” Carnell said.
AFCA considers small business disputes those that involve a credit facility of $5 million or less, but the Banking Code of Practice sets the small business limit at $3 million.
Locke explains AFCA will view business loans between $3 million and $5 million as small business issues, regardless of what the Banking Code of Practice says.
“We’re not bound … it’s not as narrow as if the code doesn’t cover it then we can’t cover it,” he says.
To be considered as a small business by AFCA a firm must also have less than 100 workers (up from 20 workers under the previous regime).
Under AFCA the compensation cap has also increased from $323,500 to $1 million, while primary producers have a $2 million cap.
NOW READ: Nothing to see here: Banks oppose SME lending regulation crackdown
NOW READ: “Too many outs”: Ombudsman slams banking code for being weak on small business protections
Comments