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the Queensland Bank (AS: BOQ) The stock price will be under scrutiny this morning after the bank’s small business loans were deemed unfair.
The Federal Court made Discovery against the bank’s small business contracts yesterday. The issue was first reported by the Australian Securities Investment Commission (ASIC).
The Bank of Queensland share price ended yesterday’s session at $ 9.57.
Let’s take a closer look at the Federal Court decision.
Federal Court decision
The Bank of Queensland’s share price is in the spotlight after the bank was ordered to replace loan contracts.
Bank of Queensland must now work with its small business clients to renegotiate contracts that both sides deem fair.
The court ruled in favor of ASIC’s allegations. The Bank of Queensland’s small business loans violated Australian Consumer Law and ASIC.
The Bank of Queensland did not respond to The Motley Fool Australia’s request for comment in time for publication.
Loan contracts allowed the bank to change the terms of a loan without notice and defaulted loans without proper proof.
Small business clients could also be subject to penalties for leaving contracts due to newly implemented terms.
In addition, customers could not resolve the issues that led the bank to find that they had defaulted on their loan.
The Bank of Queensland had also placed a clause in the contract stating that what they believed the borrower to have had to be the real amount. If the bank got it wrong, the borrower was responsible for proving their true debt.
ASIC and the court did not claim that the bank used the unfair terms against any of its small business clients. However, the bank agreed that the conditions were likely to financially harm its customers.
The court found similar clauses in the loan contracts of other small businesses in the bank. He ordered the Bank of Queensland to replace all cases of unfair terms with new fair terms.
This is not the first time that an ASX-listed bank has been pulled from its lending contracts. In 2010, the Federal Court found that the Bendigo and Adelaide Bank Ltd (ASX: BEN) had used unfair terms in its small business loan contracts.
Bank of Queensland Share Price Snapshot
The Bank of Queensland share price is doing well on the ASX.
It has gained 27% since that time last year. It is also 59% higher than it was at the same time last year.
The bank has a market capitalization of approximately $ 6.1 billion, with approximately 639 million shares outstanding.