The Australian Small Business and Family Enterprise Ombudsman has warned small business borrowers to check the credentials of lenders carefully before signing a loan contract, after a lender involved in a dispute refused to engage in mediation.
The ASBFEO said small business borrowers should ensure that a lender is a member of the Australian Financial Complaints Authority before taking out a loan.
The lender in this case, Prudent Capital Pty Ltd, is not a member of AFCA, so when the borrower and the lender got into a dispute the borrower sought the assistance of the ASBFEO.
The ASBFEO tried to get the parties involved in mediation but Prudent Capital refused.
According to the ASBFEO the dispute involved an allegation that the lender “applied substantial interest and penalties to the loan that increased through its own delays”.
The borrower also alleged that Prudent Capital acted in ways that obstructed the small business from refinancing.
ASBFEO ombudsman Kate Carnell said in a statement: “Small business borrowers can only access a free and independent dispute resolution process for their financial complaints if their lender is an AFCA member.
“Not all lenders are AFCA members – in fact many are not.”