Borrower beware: Ombudsman names and shames lender Prudent Capital

Small business ombudsman Kate Carnell has singled out short-term business loan provider Prudent Capital over allegations the company has treated one of its small business clients unfairly.

In a statement published on Monday, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) publicised allegations one of Prudent’s clients was the victim of high interest rates and penalties, and was obstructed from refinancing by the lender.

The small business, which remains unnamed, contacted ASBFEO for assistance after a dispute emerged with the lender, but Prudent subsequently refused to engage in mediation, instead taking direct action against the company.

“I am extremely disappointed by the refusal of Prudent Capital to engage in mediation and seek to resolve the dispute in a fair way and I continue to encourage Prudent Capital to reconsider its refusal,” Carnell said in a statement.

“The dispute involved allegations that Prudent Capital applied substantial interest and penalties to the loan that increased through its own delays.”

Prudent Capital is a short-term lending provider specialising in business loans.

According to ASIC records, Paul Stone and Jason Brockmuller are listed as directors of the company. Stone and Brockmuller are also joint chief executives of HomeSec Business Finance, but it is not clear whether these are the same business.

The notice is the second time in ASBFEO’s five-year history that Carnell has singled out a company for refusing to engage in mediation.

Under the Australian Small Business and Family Enterprise Ombudsman Act 2015, Carnell is able to name and shame parties that refuse to engage in, or withdraw from, alternative dispute resolution processes.

The ombudsman says this case serves as a timely reminder to businesses to be careful who they seek funds from, particularly amid the COVID-19 pandemic.

“Small business borrowers can only access a free and independent dispute resolution process for their financial complaints if their lender is an AFCA [Australian Financial Complaints Authority] member,” Carnell said.

“Not all lenders are AFCA members – in fact many are not – and small businesses need to be aware of the risks.”

Prudent Capital declined to comment.

NOW READ: Money in your pocket? What the $105 billion lending boost means for small business

NOW READ: “Dire circumstances”: Small business ombudsman calls for support for sole traders and self-employed entrepreneurs