Federal Court finds against BOQ in ASIC lawsuit

The Federal Court has found that Bank of Queensland (BOQ) has written contracts that were unfairly weighted towards it and gave it the right to change terms unilaterally.

The court decision came on the back of a suit filed by ASIC that alleged that BOQ has written one-sided loan contracts with their small business customers.

The court decision cited the following terms as unfair.

• “Unilateral variation clauses which allowed BoQ to vary the terms and conditions of their contracts without giving borrowers advance notice or an opportunity to exit the contract without penalty;
• event of default clauses which allowed BoQ to unilaterally determine whether a default has occurred as well as call defaults based on events that do not present any material risk to BoQ and without giving borrowers an opportunity to address the issue;
• indemnification clauses which allowed BoQ to make a claim against a customer for losses caused by BoQ’s mistake, error or negligence; and
• conclusive evidence clauses which meant that if BoQ issued a certificate stating an amount owing by a customer, that amount would be assumed to be correct unless the customer could prove otherwise.”

The action was dated back to November 2016, when legislative changes came into force.

“Small business owners deserve to be able to enter into fair loan contracts, especially where they have little or no ability to negotiate the terms,” said Sean Hughes, ASIC Commissioner. “ASIC will take action against unfair practices in standard form contracts, whether it be for consumers or the small business community.”

All contracts drawn up under the old wording have been declared null and void and redrafted with new terms, as per the order of the judge,

“The declarations sought are appropriate because they serve to record the court's disapproval of the contravening conduct, vindicate the claim by ASIC that the bank had contravened the Act, assist ASIC to carry out the duties conferred upon it by the Act, and deter other corporations from entering into contracts containing unfair terms,” said Justice Katrina Banks-Smith in handing down her decision.

A BOQ spokesperson responded: "Bank of Queensland (BOQ) confirms the Federal Court has approved orders jointly agreed between BOQ and ASIC in relation to terms in standard form contracts for small business lending. These contracts were entered into or renewed on or after November 2016."

"While BOQ will amend these contract terms, the Court noted ASIC did not allege BOQ ever relied on the terms in an unfair manner or in a way that caused customers any detriment, loss or damage. BOQ will write to any customers with affected contract terms."

"BOQ  has also been reviewing other small business contracts with a view to removing any similar contract terms."