The benefit of this approach was dependent on the terms of the contract (which is commonly one-sided) and the willingness of the finance company to terminate the contract.
According to Dr Latham, ASBFEO has also fielded inquiries from small businesses with high interest and penalty financial arrangements with financiers that are not members of the Australian Financial Complaints Authority (AFCA).
While there are established channels via AFCA to address disputes where a financier is a member of AFCA, these are not available for family and small businesses that enter into financial arrangements with non-AFCA members.
“The contracts will commonly fail to provide dispute resolution mechanisms outside the formal court system,” he said.
As such, Dr Latham urged SMEs to secure finance from firms that are AFCA members.
“This means that should an issue arise, there is an established process to help resolve it and that help is backed by AFCA working with the parties,” he said.
“We are keenly interested in more commercial finance companies stepping up and becoming members of AFCA. From 1 July, AFCA introduces lower fees that cover the cost of five disputes annually (should they arise).
“There really is no excuse now for commercial finance companies failing to be members of AFCA.”