A lender that took direct action against its small business client after refusing mediation has been called out by Australian Small Business and Family Enterprise Ombudsman Kate Carnell, who is attempting to fashion the unfortunate episode into a learning opportunity for small business owners looking to take out a loan in the future.
The Ombudsman’s office received a request for assistance from a small business in dispute about its loan with Prudent Capital, one which included a number of alleged wrongdoings.
However, the lender refused to engage in mediation and proceeded to take direct action against its small business client.
“I am extremely disappointed by the refusal of Prudent Capital to engage in mediation and seek to resolve the dispute in a fair way,” said Carnell.
“I continue to encourage Prudent Capital to reconsider its refusal.”
The small business involved alleged that Prudent Capital applied substantial interest and penalties to its loan that increased through the lender’s own delays.
“It was also alleged Prudent Capital acted in ways that obstructed the small business from refinancing,” Carnell added.
According to the Ombudsman, small businesses should heed the “timely and critical reminder” to check the lender they are considering taking out a loan through is an AFCA member before initiating the transaction.
“Small business borrowers can only access a free and independent dispute resolution process for their financial complaints if their lender is an AFCA member,” she explained.
“Not all lenders are AFCA members – in fact, many are not – and small businesses need to be aware of the risks.
“Access to funding continues to be a major issue for small businesses. It’s crucial they make the right choices when it comes to managing their finances.
“I would encourage small businesses to go to their trusted accredited financial adviser before making any big decisions,” she concluded.
