Fintechs log on to new online lending code of conduct

Six local fintechs have signed up to a new online lending code of conduct set to take effect by the end of the year.

Brad Kitschke, Kate Carnell, Neil Slonim and Helen Gordon: Source: Supplied

Small businesses looking for a fairer deal from online lenders have won extra protection with a new code of conduct coming into effect by the end of this year.

Six local fintech lenders — Capify, GetCapital, Moula, OnDeck, Prospa and Spotcap — have signed up to the code, which outlines the best practice guidelines for the fintech industry.

All six lenders have committed to comply with the code, developed jointly by the Australian Finance Industry Association (AFIA), the Australian Small Business and Family Enterprise Ombudsman (the Ombudsman), SMB advocate, theBankDoctor.org and FinTech Australia, by December 2018.

Apart from meeting all of the current legal and regulatory requirements the six lenders have also agreed to provide an additional layer of transparency through the introduction of a pricing comparison tool.

The comparison service will give borrowers all of the key metrics, including total repayment amount, annual interest rate and annual percentage rates, allowing them to compare the cost of unsecured loans.

Small Business Ombudsman Kate Carnell said that the code was the first step in bringing more transparency into the fintech sector and helping customers better understand what they are signing up to.

The code will ensure borrowers can identify if an online loan is right for their needs, exactly how much it is going to cost, and if it’s the best solution available to them. It also clearly spells out what’s required from online lenders and the standards they need to deliver.

“This is certainly a great starting point, however, at present the Code is limited to balance sheet lenders,” she said.

“This is about an industry coming of age, an entire industry is only as good as its weakest player and it’s important for the fintech industry to take on board lessons from the issues that are happening in the financial sector.”

According to Ms Carnell, it was important to get the broader fintech industry involved in the process.

“I look forward to hearing from members of the roundtable held late last year and discussing how the broader fintech industry can move to adopt the code.”

AFIA will appoint a Code Compliance Committee (CCC) as an independent governing body to monitor and enforce the code and the body’s CEO Helen Gordon said that the code will form the framework around which sustainable lending outcomes can be delivered.

“The code has been developed in recognition that the community is a broad community and one of the commitments is to promote good behaviour across the entire industry.”

“I also believe this proactive push for self-regulation by online lenders to small businesses will provide a level of transparency as our members work with their small business customers to finance Australia’s future,” Ms Gordon added.

Industry body FinTech Australia’s CEO Brad Kitschke said that the new crop of technology-driven service providers have to do everything they can to earn and retain the trust of the public.

“A big plank of the next iteration of our agenda is to work with our members and other stakeholders to make sure that there is a level of trust and confidence in our industry.”

“We have various policy working groups that cover lots of different activities, not just balance sheet lenders but also peer-to-peer lenders and other products.”

Access to capital is a serious problem for SMBs, one that has given online lenders the room to operate initially without much oversight. Ms Gordon said that the codes provides avenue for any potential dispute resolution.

“The code is about creating a framework that helps customers and if someone is unhappy the signatories to the code must have an internal dispute resolution process, they are also committed to be part of an external dispute resolution scheme.”

“So there is an ability to escalate and have someone external come in and take a look.”

TheBankDoctor.org founder Neil Slonim said that the code could serves as a template to make the non-bank SMB lenders more transparent as well.

“It’s great to see the six balance sheet lenders get involved and the introduction of the comparison tool, but clearly we want the smaller fintech lenders to embrace the code.”

“The code can apply to any type of SMB lender fintech or otherwise,” he said.