Marketplace lenders who cater to small businesses are about to face increased regulation in relation to the credit they provide. From 12 November 2016, some businesses will receive the same protection currently available to consumers as unfair contract terms in small business contracts will become prohibited.
Small business contracts include loans which are entered into with businesses which have fewer than 20 employees for an amount less than $300,000 or less than $1 million if the term of the loan is more than 12 months.
Under the new law, a contract term will be unfair if:
- it would cause a significant imbalance in the parties’ rights and obligations;
- it is not reasonably necessary to protect the interests of the party who would be advantaged by the term; and
- it would cause detriment to a party if the term is relied on.