Code of Lending Practice Established for Online Small Business Lenders
(4 July 2018 - Australia) Six online small business lenders including Spotcap, OnDeck, Capify, GetCapital, Moula, Prospa have collaborated extensively to release a new Code of Lending Practice seeking to standardise the disclosure and transparency of their lending offerings.
The code defines the best practice principles and is a proactive move to compile the obligations of online small business lenders into one document, making it easier for market participants and entrants to understand their responsibilities. The Code will be enforced after 1 January 2019 and was developed in conjunction with the Australian Finance Industry Association (AFIA), the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), BankDoctor Neil Slonim and Fin Tech Australia. AFIA is developing the charter setting out governance principles and standardising pricing and disclosure elements, while it will also appoint a Code Compliance Committee (CCC) to independently monitor and enforce the code.
The code was patterned on examples from the relatively more mature UK and US small business lending markets. A charter focused on governance will support the monitoring, review, and enforcement of the code. Key elements included in the code include the introduction of a pricing comparison tool providing key metrics that will allow customers to compare the cost of unsecured loans from the signatories, simplified loan summary, a glossary of key terms in accessible language that applies directly to online small business loans and signatories must annually reaffirm compliance with the Code of Lending Practice.
“We're proud to be working together to take proactive steps to bring transparency to the market, and ensure we're doing what's best for Australian small business owners,” the six CEOs of the Code signatories said in a joint statement. The six online business lenders reaffirmed “their commitment to meet all current legal and regulatory requirements, and adds an additional layer of transparency and disclosure that is not currently being provide in the market”.