Top fintech lenders create own code of conduct
The code has taken effect from 1 January.
Australia's seven biggest online business lenders have introduced the independent Online Small Business Lenders Code of Lending Practice in an effort to self-regulate and increase confidence in the industry.
The lenders Prospa, Moula, OnDeck, Spotcap, Capify, GetCapital and Lumi worked to develop the code last year and will now comply with the lending standards it lays out. The code has been endorsed by the Australian Finance Industry Association and small business ombudsman, and aims to improve transparency around the price and terms of finance, as well as standardise interest rate disclosures.
With traditional banks pulling back on small business lending following the banking royal commission, online lenders believe interest rate disclosure will help create competition in the industry, with online small business lending now estimated to reach $1 billion per year.
Beau Bertoli, co-founder and joint CEO of Prospa, believes the code will help small business owners better understand how much financing will cost and if it is right for their needs. "Prospa has consistently been committed to helping lift transparency across the industry and transform the way small business owners experience finance. Our focus has always been on putting customers at the heart of our business and doing the right thing by them. We continue to encourage other small business lenders in the industry to engage with AFIA and sign up to the Code of Lending Practice," he said.
As part of the new code, lenders will now give customers a SMARTBox alongside their loan contract, which lays out the key features and pricing metrics on the loan product, based on the loan amount, loan term and risk grade for the specific customer.
The lenders are now also members of the Australian Financial Complaints Authority and are overseen by a code compliance committee chaired by former FlexiGroup CEO Symon Brewis-Weston.