ASIC Named Non-Bank SME Lending and Unfair Contract Terms in Its New Plan. Your Commercial Files Sit Outside NCCP, Not Outside This

The line most of the coverage skipped

ASIC released its Corporate Plan 2026–27 on 26 August 2026. The accompanying media release led with the regulator’s framing of itself — easier to deal with for businesses trying to comply, harder to avoid for those causing harm — and with artificial intelligence, scams, insurance claims and superannuation. Chair Sarah Court’s quotes in that release are about balance: “Strong regulation and economic growth are not opposing objectives,” she said, and “that means reducing unnecessary friction for those trying to comply, while making it harder for those causing harm to avoid scrutiny and accountability.”

Inside the plan itself, under the first of five strategic priorities — Improve consumer and small business outcomes — there is a short entry headed “Lending to small businesses”. It reads, in full:

Two sentences of context are worth adding before anyone repeats that in a client meeting. First, the plan notes that expected timeframes for its listed work are more than one year unless otherwise stated, so this is a supervisory program rather than a campaign with a deadline attached. Second, and more importantly, this is ASIC telling the market where it intends to look. It is not a finding. The plan does not name a lender, does not allege that any non-bank uses unfair terms, and does not describe an enforcement action. Brokers who translate “ASIC is examining non-bank SME lending” into “non-banks have unfair contracts” will be wrong about the facts and unhelpful to their clients.

What the line does tell you is that a form of paper you routinely put in front of small business clients is now formally inside a regulator’s field of view. That is worth ten minutes of your week.

ASIC also said conduct risk is a distribution problem

The second passage brokers should read sits earlier in the document, in ASIC’s description of its operating environment. Under the heading “Conduct risk”, the plan states that “conduct risk across all sectors is increasingly shaped by distribution and servicing choices, rather than product features or firm size”. It goes on:

Read that alongside the SME lending commitment and the shape of the year becomes clearer. ASIC is describing a supervisory lens in which the product is less interesting than the path it travelled to the borrower. If the regulator’s stated view is that outcomes are shaped at the point of distribution, then a review of small business lending practices is not confined to what a lender drafted. It reaches how the facility was presented, by whom, and on what basis.

Again, precision matters: this is descriptive language about the market, not an accusation directed at the broker channel. But it is the regulator saying, in its own planning document, that intermediaries are where influence now sits.

Why this lands on commercial files, not your residential book

Most brokers have been trained to think about compliance through a single frame: the consumer credit regime, responsible lending, and Best Interests Duty. That frame governs your residential book and it is the frame your licensee audits against. It is also, for the most part, not the frame that applies to a business-purpose facility.

That gap is precisely why the unfair contract terms regime exists in this space. As ASIC records in Report 565, the unfair contract terms provisions that applied to consumers were extended to cover standard form small business contracts with effect from 12 November 2016. Small businesses, ASIC wrote in that report, “like consumers, are often offered contracts for financial products and services on a ‘take it or leave it’ basis, commonly entering into contracts where they have limited or no opportunity to negotiate the terms”.

The regime was strengthened again from 9 November 2023. According to ASIC’s own guidance, a contract is covered where a party employs fewer than 100 people or has turnover for the last income year of less than $10,000,000, and, for protections under the ASIC Act, where the upfront price payable under the contract — excluding interest — does not exceed $5,000,000. ASIC states the prohibition sits in section 12BF of the ASIC Act, that an unfair term is void, and that under the strengthened regime each unfair term in a standard form contract may be treated as a separate contravention. ASIC’s material also notes that minor negotiated changes may not be enough to take an agreement outside the definition of a standard form contract.

What “unfair” actually means

The word does a lot of work, and it does not mean “a term the client dislikes”. ASIC sets the test out plainly in Report 565. A term in a standard form small business contract is unfair if all three limbs are met: it would cause a significant imbalance in the parties’ rights and obligations under the contract; it is not reasonably necessary to protect the legitimate interests of the party that would benefit from including it; and it would cause financial or other detriment — delay counts — to the small business if it were applied or relied on.

Two further factors are relevant: how transparent the term is, and the contract as a whole. ASIC describes a transparent term as one that is legible, expressed in reasonably plain language, presented clearly, and readily available to any party affected by it. If a court declares a term unfair, ASIC notes, the term is void from the outset rather than from the date of the declaration.

For a broker, the transparency limb is the one to sit with. “Readily available to any party affected by the term” is not a drafting standard you control, but it is adjacent to something you do control: whether the client saw the document, when, and with what explanation.

The five clause families ASIC has already been through

The useful thing about this priority is that ASIC has shown its work before. In March 2018 it published Report 565, Unfair contract terms and small business loans, detailing the changes the four major banks made to their small business loan contracts. That report reflects the thresholds in force at the time — it notes the laws then generally covered small business loans of up to $1 million — so do not use its numbers. Use its structure. ASIC worked through five categories:

Entire agreement clauses. Terms stating the written contract is the whole of the bargain. ASIC’s concern was that these “could absolve the lender from any contractual responsibility for conduct, statements or representations that the lender’s staff may have made to small business borrowers about how the contract would operate” — including how discretions would be exercised. Every broker who has relayed a BDM’s view of how a lender “usually handles” a covenant breach should read that sentence twice.

Broad indemnification clauses. Terms making the borrower liable for the lender’s losses, costs and liabilities, including those outside the borrower’s control. ASIC’s stated concern was indemnities extending to losses caused by the fraud, negligence or wilful misconduct of the lender, its employees, contractors, agents, or a receiver the lender appoints.

Events of default. The category with the most practical bite. ASIC observed that non-monetary defaults are “often described at a high level of generality” and that a material adverse change clause “gives extremely wide discretion to the lender — if the lender considers that any change in circumstances is materially adverse, it can call a default”. It also noted the ASBFEO’s finding that non-monetary default clauses allow lenders to trigger a default where risk factors have changed even when the borrower has continued to meet repayments. The risk ASIC identified was the combination: broad discretion about whether to call a default, paired with broad discretion about the consequences — default interest, stopped drawdowns, investigating accountants, accelerated repayment, or enforcement.

Financial indicator covenants. Ratio tests such as interest cover or LVR. ASIC’s concern was their use as default triggers where a breach does not present a material credit risk to the lender. In 2018 the banks removed them for property investment loans and, in various forms, applied materiality thresholds or confined them to specialised transactions.

Unilateral variation clauses. Lender-side rights to change the terms of the facility without a corresponding borrower right.

None of that is a statement about any lender on your panel today. It is the anatomy of the review ASIC ran last time, applied to banks. The plan says the next look is at non-banks.

Where a broker actually sits in this

Be clear about the limits of your exposure, because overstating it helps nobody. You do not draft the lender’s contract. You are not the party that proposes, applies or relies on a term in it. If a term in a lender’s standard form facility were found unfair, that is a matter between the lender, the borrower and the regulator.

What you do own is narrower and more real:

What you told the client the facility would do. This is the exposure that matters most. Commercial term sheets are negotiated in shorthand and summarised in phone calls. If your summary of a covenant, a default trigger or a fee is more benign than the document, that gap is yours — and an entire agreement clause in the lender’s paper does not protect you from it. The fix is unglamorous: put the material terms in writing to the client, in the client’s language, before settlement, and keep the record.

Your own client agreements. If your brokerage uses a standard form fee agreement, services agreement or engagement letter with small business clients, that agreement is itself a contract with a small business. Whether the unfair contract terms regime reaches a particular agreement depends on the agreement and the parties, and that is a question for your licensee or a lawyer — but if you have never had those documents reviewed against the current thresholds, this is the year to ask.

Panel selection you can explain. Best Interests Duty applies to regulated credit assistance and, as a rule, not to business-purpose lending — confirm the boundary for any file with your licensee. But the absence of a statutory duty is not the same as the absence of a standard. If ASIC’s stated lens is that outcomes are shaped by distribution, a broker who can show why a particular non-bank was chosen for a particular SME file is in a materially better position than one who cannot.

Why now: the channel has moved

The reason this priority is landing in 2026 rather than 2018 is that the flow has moved. Broker Daily reported on 31 August, citing Broker Pulse’s 2026 Third-Party Lending Report based on surveys of more than 700 brokers over 12 months, that broker usage of the majors in commercial lending has fallen sharply — ANZ to 34.16 per cent from 45 per cent a year earlier, NAB to 34.44 per cent from 37 per cent — while specialist non-banks including Dynamoney and Metro Finance posted double-digit percentage-point gains. On the same numbers, broker participation in asset finance rose to 61 per cent from 54 per cent and in business loans to 65 per cent from 60 per cent. Those figures are from a single research house reported by one outlet; treat them as directional.

Set that against ASIC’s description of its operating environment, which records that “financial stress across some households and small businesses remains elevated with tendencies towards slower growth, persistent inflation and sustained cash-flow pressures”. More SME lending, more of it through non-banks, more of it distributed by brokers, and borrowers under more cash-flow strain. That is the combination the priority is responding to.

What to review this week

What to watch next

Three things. Whether ASIC follows the plan with a consultation, an information sheet or a report specific to non-bank SME lending — that is the document that will tell you what it actually found. Whether the non-banks on your commercial panel move first and refresh their standard terms, as the majors did in 2017 and 2018 under REP 565; a lender that volunteers a plain-language summary of its default and covenant provisions is telling you something useful about how it intends to be looked at. And whether aggregators start asking for commercial file notes with the same rigour they apply to residential BID records.

The broader signal is the one worth carrying into next year’s planning. Diversification has been the industry’s answer to a flat residential market for three years running, and the advice has been almost entirely commercial: new revenue, new client segments, less rate-driven churn. What has been missing from that pitch is that the commercial book carries a different compliance surface, not a smaller one. It is quieter, it is less audited by your aggregator, and until last week it was not on the regulator’s published list. Now it is.

You do not need to become a contracts lawyer. You need to be the broker who has read the paper before the client signs it, who wrote down what they said about it, and who can explain why that lender was on the file. That was always the right answer. As of 26 August, it is also the answer to a question that may eventually get asked.