The Bank of Queensland Limited (ASX: BOQ) share price is struggling today after the Federal Court found its small business loans to be "unfair".
As the Motley Fool Australia reported this morning, the Court determined the loans' contracts were unfair and broke Australian law. It ordered the bank to remove the unjust terms.
The Bank of Queensland share price has, understandably, suffered. It's flat with its previous closing price of $9.57.
Let's take a closer look at today's news of the Bank of Queensland.
Federal Court finds loans "unfair"
The Bank of Queensland share price has had a troubled day after the Australian and Investment Commission (ASIC) won its Federal Court case against the bank.
ASIC has claimed the bank's small business customers had been placed under weighted loan terms since November 2016.
The Federal Court found in favour of ASIC's claims that the bank's small business loans' terms breached Australian Consumer Law and the ASIC Act. In her judgement, Justice Banks-Smith stated:
[T]he declarations sought are appropriate because they serve to record the Court's disapproval of the contravening conduct, vindicate the claim by ASIC that the bank had contravened the Act, assist ASIC to carry out the duties conferred upon it by the Act, and deter other corporations from entering into contracts containing unfair terms.
However, ASIC, Bank of Queensland, and the Federal Court stated none of the bank's customers was impaired by the clauses. Bank of Queensland will now amend the terms, as ordered by the Court.
According to ASIC, the loans' contracts meant the bank could change its terms at any time. Additionally, borrowers didn't have the chance to leave a newly revised contract without being penalised.
Bank of Queensland could also default a customer's loan due to events that wouldn't cause the bank any financial harm. Further, it could do so without giving a borrower the chance to address the issue.
Finally, the contracts stated if the bank erred on the loan's details, the customer had to prove its failure. In a release detailing the Court's finding, ASIC stated:
[I]f BoQ issued a certificate stating an amount owing by a customer, that amount would be assumed to be correct unless the customer could prove otherwise.
Bank of Queensland share price snapshot
Safe to say, it hasn't been a good day for the Bank of Queensland.
However, the Bank of Queensland share price is still in the green. It has gained 27% year to date and 59% over the past 12 months.
