Kate Carnell: Banking royal commission option must stay on table to ensure justice for SMEs “at wits’ end”

Small Business Ombudsman Kate Carnell says the prospect of a royal commission into Australia’s banking sector needs to remain on the table if the Ramsay Review into dispute resolution can’t find a way to deal with SMEs that have faced conflict with the banks over loan terms.

Speaking to The Daily Telegraph over the weekend, Carnell said the government cannot keep trying to take the idea of a royal commission off the table, citing thousands of individuals and SMEs who “deserve justice” after engaging in disputes with the big banks.

This morning Carnell told SmartCompany that while a royal commission is not “the preferred approach”, there needs to be some recourse for SMEs that have been treated poorly by the big banks and now have little way of prosecuting their cases, saying the question of a banking probe is really about “access to justice”.

“I don’t think a royal commission is the best option, as a royal commission can’t get compensation and will probably take a number of years. The problem is a lot of these people are at their wits’ end, really, and don’t want to wait.” 

Carnell’s focus is a number of unresolved cases uncovered through her work, particularly her small business lending inquiry, which found the big banks had caused “significant harm” to the small business sector through their ability to comprehensively alter lending terms midway through agreements.

Professor Ian Ramsay is currently leading a review into the dispute resolution framework of Australia’s financial systems as the government pushes for a “one stop shop” for banking disputes. 

While Carnell is optimistic about the potential of the Ramsay Review to come up with an suitable arbitration structure for SMEs, she says it’s critical that any new frameworks provide avenues for small businesses that have had disputes with banks in the past.

There are a number of cases, some up to 10 years old, which still need reviewing, and Carnell is concerned these individuals might not be able to access justice in a new system.

“Ramsay has been asked to look at these cases and a way forward. If they find they can’t, then that’s when we’ll have to look for other options. From where I sit, doing nothing isn’t an option,” she says.

In a consultation paper released by the Ramsay Review in September 2016, the panel considered the possibility of creating a banking tribunal system for small claims that is separate to the mainstream courts system, and considered the suggestion that the Small Business Ombudsman’s office act as a loan disputes tribunal in some circumstances.

The 2017 budget pledged to improve the processes for small businesses and consumers to take on the banks, outlining the planned creation of the Australian Financial Complaints Authority, which would consolidate dispute resolution processes and give SMEs the ability to access higher claims to damages.

While battle lines have been drawn between the two major parties on the prospect of a royal commission, Carnell says that by taking a step back, one can see the importance of simply ensuring that a solutions is found for all SMEs that have been treated unfairly by the banks.

“The divide between big and small business is about the capacity to get justice, and the court system is really not an option,” she says.

Going forward, whatever dispute frameworks the country decides on, they should have the effect of levelling the playing field when SMEs prosecute their case against big players, Carnell says.

“For businesses, taking on big businesses is a brave thing — maybe a brave, silly thing — to do; the costs are just so horrifying,” she says.  

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