A report from ASIC and ASBFEO charting progress by the major banks towards ensuring unfair terms are no longer included in their small business loan contracts shows it's not all glossy pictures. The report, titled 'Unfair contract terms and small business loans', follows up the work done by the Australian Small Business and Family Enterprise Ombudsman and ASIC to review of small business standard form contracts at eight lenders between November 2016 and March 2017.The latest ASIC publication:•    identifies the types of terms in loan contracts that raise concerns under the law;•    provides details about the specific changes that have been made by the banks to ensure compliance with the law; and•    provides general guidance to lenders with small business borrowers to help them assess whether loan contracts meet the requirements under the unfair contract terms law.The key criteria for coverage are: loans are up to A$1 million, a standard form contract is used; and the loan is made to businesses with fewer than 20 staff.The result reflects work done jointly over the course of a year by ASIC and ASBFEO in the face of a sometimes open reluctance to comply. This was despite the protections against unfair contract terms being in place for small business operators from 12 November 2016 - after another one-year "transition" period.These delays are a particular point of irritation for Kate Carnell, the small business and family enterprise ombudsman. Speaking on ABC Radio, she was uncompromising in her reaction."We didn't believe these clauses were ever fair but now, at least, we have ASIC coming out in black and white and confirming that," Carnell said."Unfair contract legislation has been in place for over a year and only now are the big banks starting to become compliant," she said. "They initially said 'no, our contracts are fine, thank you very much'. It's extraordinary it's taken this long for them to comply with the law."She referred to clauses that exempt a bank from fraud or wilful misconduct by their own employees, so the bank will not be financially liable. Harsh application of covenants where there was no risk to the lender was another area of contention.Once ASIC became involved, Carnell said, the Big Four banks agreed quickly to get rid of these unfair contract term - notably introducing materiality measures. Nevertheless, said Carnell, the only major bank to produce an acceptable re-drafted contract, compliant with the legislation to date, is NAB. "The other Big Four banks haven't given us a copy of anything to look at, to see if they comply. You would hope that with the royal commission [examining misconduct in the financial services sector] the banks would realise that it's really important to comply with the law."And Kell was in a similar frame of mind:"ASIC will review small business lending contracts across the market. There are no excuses for failure to comply with the UCT laws, and we will consider all regulatory options available to us if we identify lenders whose unfair contracts break the law,"