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Australian regulator sues 2 banks over alleged unfair terms in lending contracts

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Australian regulator sues 2 banks over alleged unfair terms in lending contracts

Australia's securities regulator sued Bank of Queensland Ltd. and Bendigo & Adelaide Bank Ltd. for allegedly applying unfair terms in their lending contracts with small businesses.

The Australian Securities and Investments Commission claimed that certain terms used by the banks in their contracts with small businesses cause a significant imbalance in the parties' rights and obligations and are not reasonably necessary to protect the banks' legitimate interests. Some of the questionable clauses allow the banks, but not the borrowers, to change the terms of the contract without the consent of the business owners, the ASIC added.

If the Federal Court of Australia agrees with the ASIC, the specific terms will be void and unenforceable by both banks in these contracts, the regulator noted.

Responding to the regulator's lawsuit, Bendigo & Adelaide Bank said the suit relates to a version of its small business loan contracts under each of its Delphi Bank and Rural Bank brands between 2016 and June 2019. The bank said it was cooperating with the regulator to reach a mutually agreed outcome.

Meanwhile, Bank of Queensland said the suit relates to contract terms in certain small business contracts entered into between November 2016 and June 2019. It added that it has taken immediate action to address most of the regulator's concerns.

In addition, Bank of Queensland said it has started a review of all small business lending contracts entered into from November 2016 and will compensate affected customers.