Small business ombudsman says banks are ‘discriminating’ against the legal sex industry

BROTHELS and sex shops are being discriminated against by banks which are in no position to rule on a business’ “morality”.

SMALL Business Ombudsman Kate Carnell has gone into bat for Australia’s sex industry, slamming the banks for “discriminating” against legal businesses by withdrawing or failing to provide financial services.

“It’s a bit rich for the banks to decide which industries are moral and which aren’t,” Ms Carnell said in a statement on Thursday.

“It’s hypocritical that banks do not provide services to the adult industry when businesses are appropriately registered and regulated. Access to banking services is essential for a legitimate business to operate.”

Ms Carnell was responding to a recent report by the Eros Association, which found the vast majority of adult industry businesses experienced unfair treatment by financial service providers.

The association estimates there are more than 1000 adults-only businesses in Australia employing around 25,000 people, with the overall industry turning over $2.6 billion annually.

One respondent quoted in the report, the operator of an adult retail and wholesale business, said their merchant facilities were withdrawn after more than 20 years with the same bank.

“Last night I received a phone call after 6pm telling me that my merchant services were going to be turned off today,” they said.

“Sure enough at 1pm they pulled the plug leaving me with four retail stores, five online retail sites and our wholesale without credit card transaction facilities. No letter, no notice.”

Another respondent, the owner of an adult retail business, recounted an experience at a bank branch. “The financial adviser in the bank had opened a new account for us while we were sitting there,” they said.

“I told him we needed the EFT machine to be up and running before we shut down the [other account]. He got on the phone and rang the EFT people to make an appointment to put the machine in the shop.

“The lady on the other end of the phone asked to talk to me, she asked me the sort of business we ran (I said adult shop), what did we sell (I said toys, magazines, costumes, lingerie etc.), did we offer any services (I said no, we are just a shop selling adult products).

“She then asked for the adviser to come back on the line, his face went a bit red, and he said ‘Really? Oh, okay, bye.’ He then told us that for ethical reasons they cannot provide this service for our shop.”

Ms Carnell, who has written to the Australian Bankers’ Association with her concerns, said the banks’ actions were undermining efforts to combat the so-called black economy. An ABA spokesman said: “As always, individual lending decisions are a matter for each bank to exercise their own commercial discretion.”

A Commonwealth Bank spokesman said, “As a major bank, we understand our role in enabling economic and social development, supporting jobs, growth, innovation and opportunities for people and businesses.

“We actively consider the environmental, social and economic impacts of our clients’ activities, and we only lend to businesses and projects where we understand and believe those risks are well mitigated.”

An ANZ spokesman said, “Subject to passing our normal credit policies for retail customers, we don’t have restrictions on lending to individuals employed within the adult industry.

“We do have restrictions for business lending to specific industries, such as military equipment, energy generation and water, but the adult industry is not one of them. However, we assess each case on its merits and in line with our own risk appetite as we do with any application for lending.”

A NAB spokeswoman said, “We regularly and prudently review our lending to various industries, sectors and activities. We consider a range of factors, including a potential borrower’s capacity to repay and the materiality of environmental, social and governance (ESG) factors.

“This is in addition to the size, type, tenor and complexity of a transaction being considered.

“Accordingly, we do not provide lending or merchant services to brothels and escort agencies. Our exposure to the legal sex industry has been decreasing over time.”

A Westpac spokeswoman said, “We assess all applications for loans and merchant facilities on a case-by-case basis however, we do not provide facilities, including merchant facilities, to customers known to be operating brothels.”

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