Experts warn against “anti-small business bill” which will restrict access to credit

Proposed legislation to regulate small business credit is “anti-small business” and will add to a mountain of red tape, squeeze access to finance and see more businesses go under, according to experts.

Last week the Federal Government released a draft bill and regulations to extend the National Consumer Credit regime to small business lending, including a requirement for a permit for people giving small business credit advice.

CPA Australia chief executive Alex Malley said releasing the draft bill on the eve of Christmas, with a truncated window for consultation, revealed the government’s own lack of confidence in this proposal.

“It’s hoping no one will notice,” he said.

“This is nothing more than a plan for another layer of red tape, an unnecessary new regulation when there is no evidence of a problem. This is a bad bill and it is anti-small business.”

Malley said the government needs to have the courage to accept it has got it wrong and pull the bill.

“Given Australia’s economic challenges, which the Treasurer now acknowledges, and the urgent need to stimulate business activity, you have to wonder how a plan for an extra layer of red tape ever saw the light of day,” he said.

The chief executive of MyCRA Credit Rating Repair, Graham Doessel, has also criticised the draft legislation, which he says “completely misses the point” and small businesses do not need less credit, instead they need a better credit reporting structure.

“Australian small businesses are already doing it tough getting credit out there post GFC – this is going to mean they will struggle even further to expand and there will be less start-ups,” Doessel said.

But Doessel said any changes to credit reporting for small businesses would be welcomed.

“There is a gaping hole in the basic rights afforded to commercial credit file holders before recovery is commenced, and this needs to be dealt with,” he said.

In the consumer landscape, if an account is overdue, then the account holder is afforded a 30-day right to remedy under the Credit Reporting Code of Conduct. This is meant to ensure that fair and reasonable means have been taken to attempt to recover the outstanding amount before further action is taken, and before the consumer’s credit file is defaulted.

As commercial credit is not covered under the Code, this right is currently not provided to commercial credit file holders and Doessel said many times small business owners have been caught out.

“The common courtesies which consumers are afforded and which many assume stay with them in the commercial sphere just don’t apply – many don’t realise just how big a risk commercial credit is.”

“It’s like the ‘wild, wild west’ out there with some lenders defaulting small businesses with little to no warning,” he said

Once a default is placed on a commercial credit file, then the length of time it remains on the credit file is legislated by the Privacy Act 1988.

“Most [SMEs] don’t need restrictions on available credit, they just need the basic credit reporting rights that they deserve,” Doessel said.