One of Australia’s major banks has undertaken a “complete overhaul” of its business standard loan contract, claiming the move will benefit more than 130,000 SME owners.
The simpler contracts utilise plain English, transparent fees and upfront charges, simpler contractual clauses, and are shorter in length.
NAB said it has discarded a third of its existing terms and conditions as part of its commitment to lifting standards across the industry.
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,” Ms O’Neill said.
“We consulted widely with industry and customers. Essentially, if the language didn’t make sense to them, we worked through a better solution together.”
The changes come after NAB announced financial indicator covenants will no longer be used in most loan contracts for new and existing small business customers with total business lending of less than $3 million in April 2017.
“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.”
NAB chief legal and commercial counsel Sharon Cook said NAB is working with the wider banking industry, ASIC and customers to address concerns raised in the Small Business and Family Enterprise Ombudsman Kate Carnell’s Small Business Loans Inquiry report.
“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,” Ms Cook said.
Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell welcomed NAB’s move, but criticised the lag in making the change happen.
“I applaud NAB for being first off the mark and urge other banks to follow,” she said.
“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 risk. Currently the contractual relationship is one-sided and unfair.”
It comes just days after NAB announced it a major push into SME accounting as part of expansion of its business services.