By IRENE CHAPPLE
A new finance regime will force lenders to give more information to private borrowers, but will withdraw that protection from small businesses.
The Consumer Credit Bill - being introduced largely to improve consumers' rights against dodgy lenders - replaces the Credit Contracts Act and the Hire Purchase Act.
The
bill places greater disclosure obligations on lenders offering finance to consumers, who are defined as individuals who take loans primarily for personal, domestic or household purposes.
But lenders will have no obligations to commercial borrowers, which are not covered under the bill.
Disclosure is the paperwork that accompanies a contract and gives a succinct description of the loan's financial details.
It is now compulsory only for commercial borrowers of under $250,000, as bigger lenders are seen as savvy enough to understand the loan contract's small print.
The reduction in paperwork is expected to make lending simpler, but lawyers say the absence of disclosure in commercial deals could hit small business owners.
"What they will lose out on is the summary of the core financial details in a simple, short form," said Buddle Findlay partner John Nankervis.
Rochelle Hume, a senior associate at Phillips Fox, said some small businesses could be as susceptible as consumers. But she said borrowers who had difficulty with it would "probably be the people who would throw [the disclosure papers] away anyway".
Both expected compliance costs to drop - helping resolve a common complaint among small business operators.
That point is pushed by Acting Consumer Affairs Minister Lianne Dalziel, who also points to the redress still available to commercial borrowers under a claim for oppressive conduct.
The "re-opening provision" of an oppressive contract is available under the Credit Contracts Act, and existing case law recognises factors particular to small businesses.
The bill is due for its first reading within the next few weeks.
