The major banks avoided litigation with the corporate regulator over small business contracts after removing offending terms before the royal commission kicked off, and the small business ombudsman has warned companies in the insurance, telecommunications and media sectors to do likewise to avoid being sued like Bank of Queensland and Bendigo and Adelaide Bank were on Wednesday.

After reviewing the unfair contract term (UCT) laws after they were introduced three years ago, Treasury is preparing to issue a regulatory impact statement this month, as the government considers whether to beef up the laws to make including the terms illegal and backing them up with penalty provisions.