Disputes for a small business borrower: which routes are open

Which tools cross the line

The Code gives a debtor under a credit contract several rights for a dispute, and the Code defines a credit contract as the provision of credit “to which this Code applies”. The complaint routes are not drawn by the Code in the same way: ASIC lists the right to take a dispute to AFCA among a small business borrower’s protections, if the lender involved is a member of AFCA.

Dispute tools, by side of the line

Tool	Inside the Code	Outside it
Disputing an amount	A debtor who disputes a liability by written notice must get a written explanation of how it arises, unless the credit provider agrees the amount and confirms it in writing.	Not given by the Code to credit outside it.
Hardship	A hardship notice, and an application to court if the credit provider does not change the contract.	Under the Banking Code of Practice, a small business can still ask its firm for hardship help.
An unjust contract	A court may reopen an unjust credit contract, mortgage or guarantee on the application of a debtor, mortgagor or guarantor.	Not given by the Code to credit outside it, except where an exclusion keeps it, as section 6 does for pawnbroking and for advances from a deceased estate.
The lender’s complaints process	Required of financial firms.	Where the lender has these duties, ASIC’s guide says a small business need not say “complaint” or put it in writing.
AFCA	Membership is required of financial firms.	Open to a small business as the AFCA Rules define one, where the lender is a member of AFCA.

When a dispute is about which side a contract is on, the Code starts with a presumption: “In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.” The weight of a purpose declaration is covered in personal or business purpose.

The routes, in order

1. The lender’s own process

   ASIC requires financial firms to have an internal dispute resolution procedure that meets its standards, and membership of AFCA. A small business does not have to say “complaint” or put it in writing for that procedure to apply. ASIC expects a complaint to be acknowledged within 24 hours, or one business day, or as soon as practicable, and a firm must give its response no later than 30 calendar days after receiving it.

2. AFCA

   ASIC’s complaints guide (September 2021) records that the AFCA Rules define a small business as one with fewer than 100 employees at the time of the act or omission complained about. For a financial hardship complaint, AFCA says it sends the details to the firm and encourages it to make contact quickly; if no agreement is reached, a case worker from its hardship team investigates. AFCA may hold a conciliation conference, a discussion it leads between the two sides, and if that does not resolve the complaint, or does not suit it, AFCA can make a final decision. It also asks the person complaining to complete a statement of financial position.

3. The small business ombudsman

   The Australian Small Business and Family Enterprise Ombudsman runs an information line and a dispute support service, both reached from its handling debts page.

4. Financial counselling for the business

   The National Debt Helpline describes the Small Business Debt Helpline as specialist small business financial counsellors, delivered free by a not-for-profit organisation, whose advice covers areas including loan repayments, bills, rent, bankruptcy and insolvency. Its details are on the National Debt Helpline’s small business page.

Timing that belongs to the Code

Two of ASIC’s complaint timeframes are written around Code tools, so they apply where those tools do. For a complaint involving a default notice, the credit provider’s response is due within 21 calendar days. Complaints involving hardship notices, or requests to postpone enforcement, must be treated as urgent.

The Code’s disputed-account right sets deadlines of its own. Under a continuing credit contract, a debtor’s notice of dispute about an entry on a statement that shows a payment date is due on or before that date. And if an application is made to court within 30 days after the credit provider’s explanation, the credit provider must not, without the court’s leave, begin enforcement proceedings over a default arising from the disputed amount. Like the hardship route to court, these rules are written for a credit contract, which the Code limits to credit “to which this Code applies”. None of them runs for credit the Code does not cover. What the business side has instead of those notices is in what a business borrower has instead.