Banks have been accused of discriminatory lending tactics by denying loans and other financial services to profitable businesses simply because they sell adult-only products.
The Eros Association – which represents adult-only businesses including adult retailers, toy manufacturers and entertainment venues – issued a report on the findings of interviews with 24 of its members and found that virtually all had suffered some form of service rejection based solely on their industry.
The report by Jarryd Bartle, policy and campaigns adviser for the association and a sessional law lecturer at Deakin and RMIT universities, suggested that businesses operating within the broad adult sector are stigmatised by lenders, who are denying profitable businesses access to funding in order to grow.
“The Eros Association frequently receives complaints of institutional discrimination against adult-only businesses in Australia. Of particular frequency are complaints of unfair treatment by financial service providers,” the report said.
“Overall, it appears financial service providers are treating adult-only businesses unfavourably on the basis of broad internal policies against the ‘adult industry’ rather than tailored assessments of financial risk.
“The experiences of participants indicated a clear trend of industry-based discrimination against adult-only businesses.”
Two-thirds of complaints were raised against the big four banks, while Suncorp, Bank of Queensland as well as Adelaide and Bendigo Bank were also singled out, in addition to specialist merchant service providers Afterpay, Shopify and ZipPay.
The complaints ranged against card facilities, bank loans, debit cards and even one rejected for a personal loan on the basis of their employment at an adult store.
“After having been a customer [with this bank] for over 20 years and them providing me with merchant facilities for adult shops, last night I received a phone call after 6pm telling me that my merchant services were going to be turned off today,” the report quoted a business owner as saying.
“Sure enough at 1pm they pulled the plug leaving me with four retail stores, five online retail sites and our wholesale [business] without credit card transaction facilities. No letter, no notice.“
A number of respondents said they were rejected on the basis that the adult industry has a higher risk of chargebacks than other types of retailers and businesses, despite them personally never having faced the issue.
“There was no other reason to reject us. We have a perfect record and never received any charge-backs after operating for 4.5 years,” one respondent was quoted as saying.
The report added: “Eros is unable to find any studies of financial risk substantiating that the adult industry poses greater risks than other retailers or service providers”.
A spokesperson for the Australian Bankers' Association (ABA) told My Business that “lending decisions are a matter for individual banks to exercise their own commercial discretion”, while the Financial Ombudsman Service said it had not received a rise in complaints about the issue.
- Opinion: Why do so many claim to represent small businesses?
By Adam Zuchetti
- Opinion: House prices not all doom and gloom
By Adam Zuchetti
- Analysis: How can SMEs realistically stay competitive?
By Adam Zuchetti