Fintech business lenders sign code to lift transparency

Six fintech start-ups that lend to small business have signed a ”code of lending practice”, a move the small business ombudsman says will improve transparency and protect SMEs by requiring the online lenders to disclose standardised pricing and fairly resolve disputes.

Prospa, which pulled an ASX float this month on concerns about its transparency, is a signatory to the code, along with Spotcap, Capify, GetCapital, Moula, OnDeck. They will be compliant by the end of the calendar year.

The code will be enforced by an independent committee to be set up by the Australian Finance Industry Association. AFIA has helped write the code, alongside the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), FinTech Australia, and SME advocate the Bank Doctor, which urged fintechs to improve disclosure in a joint report in February.

At the heart of the code is a requirement for the start-ups to disclose all costs, through a standard pricing comparison document. This will include the ”annual percentage rate” and ”total cost of credit”, including all interest expenses and fees. Lenders will also have to offer mediation of complaints and draft contracts that are compliant with all laws, including those relating to unfair contract terms (UCT), a key focus of ASIC.

Lenders are under pressure to make contracts fairer for customers, after the Hayne royal commission exposed many contracts as being complex and giving too much power to lenders.

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Source: Fintech business lenders sign code to lift transparency | afr.com