Self Employed Australia

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“Everyone needs an Advocate”

Banking sector

Historic day for small business people – Real unfair contract protections

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unfair-contractToday is historic for small business people and the Australian economy.

Today (9 November 2023) is the start of the new ‘beefed up’ unfair contract laws. These new laws have real ‘teeth’:

  • Businesses that ignore or breach the laws can suffer fines of up to $50 million.
  • Loopholes have been closed to stop businesses getting around the laws by making minor changes to their contracts and so on. The courts have wide powers to close unforeseen ‘loopholes’.

Have no doubt that these laws are a game-changer for small business people. It’s much bigger than most people realise.

And big businesses are responding. If they don’t, they are in trouble. We’re aware of at least a dozen big-name companies who have just released ‘upgrades’ to their standard form contracts.

We’ve prepared a two-page summary of the laws. Read it. You need to be aware of your rights and these protections. We provide a link to the government regulators (ACCC and ASIC) who enforce the laws.

And we think that we are entitled to claim a big chunk of credit for these laws coming into being.

  • We started campaigning for the laws in 2009.
  • It was a long, lonely, persistent seven-year campaign.
  • We were strongly opposed by some of the most powerful Australian big business lobbyists.
  • Success came in 2016 with the first laws for small business people.
  • Now, ultimate success—the laws with ‘teeth’ start today.

Of course, no-one does anything on their own. There was political support from politicians on all sides of parliament. Our huge thanks to The Australian business journalist, Robert Gottliebsen. He’s a champion of small business. But we can say that, without our campaigning, these small business protections would not be in place today.

The full story is here, showing our campaign back to 2009.

This is what we at Self-Employed Australia do. We focus on the long-term and are damn persistent.

We are delighted with today’s historic event.

But now we are focusing on defending your right to be you own boss. It’s staggering that we have to do this. The Albanese government’s Loophole Bill is the greatest attack upon small business people that Australia has seen. Here’s our campaign page.

Tomorrow (10 November 2023) I’m giving evidence before the Senate Committee that is reviewing the Loophole Bill. We’re being quite specific about the sections of the Bill that must be defeated if small business people are to exist in Australia.

Our submission to the Senate Inquiry is here (number 160). It’s big! But the issues are massive.

More soon.

Is your superannuation money safe? Morrison v Albanese

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super-safeIt’s the final run to election day and it’s anyone’s guess as to the outcome!! We’ve put out several news alerts comparing Labor and Coalition policies. We’ve sought to highlight the policy facts affecting self-employed people. Here’s our final pre-election analysis.

Last Sunday Scott Morrison made a big pitch with a new housing policy. It’s a pitch to first-home buyers. Morrison announced that if he retains government, first-home buyers will be allowed to dip into their superannuation money to boost a deposit. His theme is ‘it’s your money!’

Our comment, however, is on a broader issue affecting everyone with money in the big superannuation funds, including self-employed people. This issue shows a stark difference between Labor and the Coalition.

Do superannuation funds present a risk?

Incredibly, up until now, super funds—particularly the union/employer association-controlled Industry funds—had few if any legal requirements to be public about how they manage your superannuation money.

Compare this to listed companies, particularly banks. Banks have strict disclosure requirements. Heavy penalties apply if the banks breach these laws. Disclosure means that government, the media, financial analysts and so on can keep a close eye on the banks, not just from a performance perspective but also in terms of the key question of whether deposits are safe.

Superannuation funds have effectively faced none of the disclosure requirements that apply to the banks. We know this because of a review into superannuation (The Cooper Review) conducted by the Labor government in 2009. The global audit company Morningstar said in its submission to the Review:

Australian superannuation scheme providers and fund managers currently have a mish-mash of approaches to holdings disclosure … Superannuation and managed funds disclosure in Australia is also poor when compared with the extensive mandatory disclosure requirements for listed securities …. Regular, comprehensive holdings disclosure would also provide greater opportunity for detection of undesirable behaviours…

Neither APRA nor ASIC appeared to undertake any form of direct auditing. APRA only reported what the super funds reported, saying it took no responsibility for the data reported.

The Cooper Review recommended major changes to require disclosure. But Labor chose to ignore these, and nothing was done.

Last year the Morrison government pushed through laws that force superannuation funds to disclose how and where they invest your superannuation money. These laws took effect in March this year. Labor, along with unions and the industry superannuation associations, strongly opposed the new disclosure laws and actively sought to block them. More disclosure requirements are needed.

There is now $2.3 trillion in the big Australian superannuation funds. It is extremely concerning that Labor would oppose complete and major disclosure requirements. As Morningstar stated in 2009, without proper disclosure there is always the threat of ‘undesirable behaviours’.

Like the banks, the ATO needs a Royal Commission

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We’ve come to the conclusion that the truth about the Australian Taxation Office’s bullying of self-employed people will only come out in a full Royal Commission inquiry.

We’ve been strongly prompted to this conclusion by an article in The Australian yesterday by the doyen of business columnists, Robert Gottliebsen. Robert is correct in his article ‘The ATO is repeating the hideous mistakes of bank boards’.

The ATO controllers are in denial about the ATO’s bad behaviour, just like the banks were with unfair contracts, including abusive customer treatment (and the churches also were on sex abuse!) Robert said:

“…bank boards were in total denial and did not recognise that they had created contracts that almost encouraged staff to treat small business customers badly.”

Robert points out that change is possible but legislation is required and he recognises our efforts to achieve change. He said:

“And the (bank) directors allowed it (abuse) to continue despite years of commentary from myself in The Australian and the efforts of many others, including Self-Employed Australia’s Ken Phillips to get legislation through Parliament to make directors do the right thing and construct contracts that were fair to both parties.”

Major reform of the structures and administration of tax by the ATO is essential. The ATO has operated as is since 1936. Reform involves breaking up the ATO into separate independent authorities and an independent small business tax tribunal. We’ve detailed this in our ATO reform agenda here.

Reform should proceed without delay, however. As Robert says:

“… like the banks before fair contracts, ATO officials have the power to do what they like. And, again like the banks, they will not be caught out until there is an ATO royal commission.”

We spent seven years campaigning for fair contracts. Our campaign commitment to ATO reform is also long-term. And we are proudly obsessive in our efforts!

Our next step is submissions to the Senate Inquiry into whether the Commonwealth (eg, the ATO) complies with its Model Litigant obligations.  At the public hearing on 14 June we’ll be saying that the ATO ignores its obligations. We’ll keep you informed!

PS: Robert Gottliebsen was recently inducted into the Australian Media Hall of Fame. Quite an honour!

We don’t usually praise a bank. But—well done NAB!

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Sunday, October 15, 2017

First we said that NAB had ‘trashed its own small business brand’. We said this in March this year because of NAB’s lie that it had made its small business finance contracts comply with the unfair contract laws.

Last week we expressed tentative praise for NAB after it had ditched its bad contracts and come up with new ones. NAB’s self-congratulatory PR seemed to indicate a major step forward. But we said we’d check its standard form contract first.

Well, we’ve obtained its new standard form small business contract and it looks pretty good. You’ll find here:

If you bank with NAB or expect to, we’d anticipate this would be the contract you would receive if obtaining small business finance from them.

What we like about the contract is the following.

a) It’s in ordinary person’s language. It’s pretty much removed the legal mumbo-jumbo that’s designed to confuse people and force you to get a lawyer to understand the contract. Tick!
b) It uses personal pronouns ‘you, we, us’ etc. That is, the contract says “we will do this”… “you will need to do that”. This wording makes for greater understanding and clarity. Tick!
c) It’s relatively short and to the point. Only 21 pages. Tick!
d) Nothing sneaky. We’ve looked hard but we can’t see any clauses that might suggest a meaning different to that which appears. Tick!
e) Obligations clarity. It states fairly clearly your obligations to the bank and its obligations to you. Tick!
f) No unfair clauses. Again, we’ve looked closely and we can’t find any clauses that might breach the new unfair contract laws. Tick!

Again, we’re delighted that our nearly 10-year campaign to achieve the unfair contract laws is having serious impact. But congrats to NAB! It has taken on board not just the specifics but also the spirit of the new laws and produced a sensible contract that people can understand.

We’ve said it before. What’s important is that as contracts are progressively cleaned up, the Australian economy will undergo major change. Small business people will have a fairer environment in which to operate. This will improve competition, entrepreneurship and make Australia a stronger, fairer society. NAB has taken an important lead in this.

Bank lawyer: “We’ll do what we’re made to do”. Now they’re doing it!

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Sunday, October 08, 2017

More good news on the unfair contract front! But first some background.

Back around 2009, when we were talking to big businesses about having fair contracts, the chief legal counsel for one of the big banks said to us, “We’ll do what we’re made to do.” We realized then how difficult our campaign would be. But we succeeded. The new small business unfair contract laws we pushed for started at the end of 2016.

Well, now the banks are are doing what they’ve been made to do but, ‘butt’ has had to be kicked to achieve this. Look at NAB.

In March this year we exposed NAB lying (yes, lying) when it claimed that it had fixed its small business contracts to comply with the unfair contract laws. We said that the NAB had trashed its small business reputation. And the exposure of the NAB lie resulted in the banks being pushed into compliance by the regulators. In August the big four banks agreed to new, ‘fair’ small business contracts.

NAB has now taken an additional step. It has just announced simpler, shorter and plain English, ‘fair,’ standard form, small business contracts. Here’s its public relations blurb. The new contracts start on 16 October and don’t yet appear to be available. We’ve learnt to be careful and won’t comment until we study the new contracts. But if the contracts reflect NAB’s self-praising PR, they could deserve positive comment. We’ll let you know.

Do you rent a serviced office space?
Huge numbers of self-employed people rent serviced office space. One of the big players in the field is Servcorp. The ACCC is now taking Servcorp to Court over alleged unfair contract clauses. This will directly affect you if you use Servcorp’s services.

The ACCC alleges that clauses allowed Servcorp to, amongst other things:

  • automatically renew a contract, and increase the price, without prior notice to the customer;
  • unilaterally terminate a contract and impose penalty-type consequences on the customer;
  • unreasonably limit Servcorp’s liability or impose unreasonable liability on the customer;
  • unilaterally determine whether the contract had been breached; and
  • acquire the customer’s property without any notice.

Good on you ACCC! This is in addition to the litigation against the waste disposal company JJ Richards.

What’s important is that as contracts are progressively cleaned up (it’s going to take a long time), the Australian economy will undergo major change. Small business people will have a fairer environment in which to operate. This will improve competition, entrepreneurship and make Australia a stronger, fairer society.

Banks forced to change small business contracts. A huge win for fairness!

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Thursday, August 24, 2017

We’re mighty proud of the work we did, over close to a decade, to achieve the 2015 unfair contract laws protecting small business people. Here’s the tracking of our campaign from 2009. And it’s pretty fair to say that, without us, the laws would not have come into existence.

In that long struggle the banks consistently opposed the unfair contract laws. During that campaign one bank, NAB, was found by the courts to have engaged in ‘misleading and deceptive conduct’ in relation to a business mortgage. In our view NAB’s bank officers arguably behaved as they did because NAB’s small business finance contracts seemingly gave them unfair power.

Continuing with this deceptive theme, in December 2016 NAB issued a letter to its small business customers claiming it had changed their small business contracts to comply with the new unfair contract laws. Here’s NAB’s letter. But when we had the contracts studied, it was found that the contracts were worse, not better! Talk about NAB destroying its own brand!

Our exposure of NAB’s misleading conduct along with important work by The Australian journalist Robert Gottliebsen resulted in a chain reaction. The bank regulator, ASIC, and the Federal Small Business Ombudsman conducted a wide-ranging investigation into whether the banks’ small business contracts complied with the unfair contract laws.

After some nine months of haggling, the big four banks have agreed to change their small business contracts, removing unfair contract terms in loan facilities up to $3 million. According to a report in The Age yesterday, some of the changes include:

  • the banks will not be able to require customers to cover losses due to fraud by the bank; and
  • the banks’ ability to vary contracts will be limited.

It’s staggering that these sorts of clauses were ever in contracts. We’d wager that banks would not agree if such clauses were imposed on them in a contract.

Also making common sense, small business customers will be able to exit a contract if the banks change a contract. Isn’t that what a ‘contract’ should allow? Robert Gottliebsen gives a fuller explanation today in The Australian.

The fact that the banks had to be dragged to agree to such changes is also staggering. Frankly, they would have faced legal action if they hadn’t agreed.

The banks like to portray themselves as ethical. But with this sort of behaviour it’s easy to understand why the banks’ reputations are in the gutter.

There’s a lot more work to be done on this issue. The ‘big end of town’ are avoiding fixing their unfair contracts. Our message to them is: ‘we’re watching’. And we’ll act and expose unfair contracts wherever we find them!

Like naughty schoolchildren, banks now complying with unfair contract laws

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Thursday, June 01, 2017

Readers might recall our news alert headline, “we’ll only do what we’re made to do!” This was a senior counsel from one of the banks responding to our efforts about eight years ago asking them to support the unfair contract laws.

Then in March this year we said that NAB was trashing its own small business brand because it had, in our view, lied about changing its small business contracts to comply with the now operational unfair contract laws.

The huge news, however, is that last week the big four banks changed their small business overdraft contracts to comply with the laws. Robert Gottliebsen reports that the banks have:

  • Removed terms that absolve the bank from responsibility for their conduct.
  • Removed terms that gave banks total power to call a default when the value of secured property falls.
  • Removed terms that gave banks the power to call a default for an unspecified negative change in the circumstances of the small business customer.
  • Significantly limited terms that protect banks against losses outside the control of the small business borrower.
  • Significantly limited terms which gave the bank the ability to change the contract at will and without permission of the small enterprise.

But did the banks do this because they wanted to comply with the law? Well, the fact is that the head regulator, ASIC, forced them to comply. Robert Gottliebsen also recognizes the important role of Small Business Ombudsman, Kate Carnell and us, Independent Contractors Australia in achieving the outcome.

But now, according to the AFR, the banks are complaining that Federal Treasurer Scott Morrison is being too aggressive toward them. Um! As Morrison has said of the banks, ‘cry me a river!’ The banks have been like bullies in the schoolyard throwing sand at the little kids. The school principal has made them behave. So the banks have gone to their mommas on the school parents’ committee complaining that their little (bully) boys are being picked on! Spare us all!

The banks need to grow up! It’s their behaviour that is damaging themselves. But we also agree that there’s danger of political overreaction. The banks need to focus on a well functioning market economy and not their obsession with securing rorted advantage for themselves. If the banks do this, we might achieve important economic reforms!

Postscript: In November last year we said on ABC TV, The Business, “this is not something they (big business) can ignore!”

Banks and unfair protections

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Tuesday, December 16, 2014

The Banks are opposing unfair contract protections for small business people. Here’s their submission. But NAB were recently found to have engaged in  “…misleading and deceptive conduct … through its bank officer…” and had a mortgage guarantee set aside.

Extracts from the case National Australia Bank Limited v Smith [2014] NSWSC 1605 (13 November 2014) appear below—

BANKING – a bank advanced money to a company for the purchase of a business and took mortgage security over the domestic residence of the company’s principal and his wife to support their guarantees of the bank’s advance to the company – the company defaulted on the loan – the guarantors sold their residence partially to satisfy the Bank’s claims on the guarantees – whether the Bank engaged in misleading and deceptive conduct or unconscionable conduct in relation to the guarantees and the mortgage – whether these securities are unjust under …

Conclusion and Orders
363.    The Court’s principal conclusions may be briefly stated. The Court has found that Craig and Denise Smith, the second cross-claimants are able to set aside the mortgages and guarantees they signed as part of the Statewide transaction which they entered in December 2004 on several grounds, including misleading and deceptive conduct by the Bank through its bank officer, Mr Shackleton, for breaches of fiduciary duty …