Code of Lending Practice launched by fintech SME lenders

Fintech lenders Capify, GetCapital, Moula, OnDeck, Prospa and Spotcap have collaborated with the Australian Finance Industry Association, the Australian Small Business and Family Enterprise Ombudsman, theBankDoctor.org and FinTech Australia to produce a Code that will improve transparency and disclosure in this important alternative source of debt funding for Australian SMEs.

The Code will inform SMEs what they can expect when they engage with lender signatories and it will also include a pricing comparison tool which will show borrowers the true total cost of borrowing.

By signing the Code these lenders are enshrining their commitment to engage with small business owners in a transparent and responsible manner. The six signatories have committed to being fully compliant by the end of December this year. Further work needs to be done in areas like implementation of the pricing comparison tool. An independent and suitably qualified Code Compliance Committee will be appointed to determine whether a lender is compliant. The CCC will also be tasked with the responsibility of ensuring ongoing compliance with and enforcement of the Code. Borrowers and other stakeholders will be able to make complaints to the CCC which will have the power to impose penalties on lenders that breach the Code.

Other fintech SME lenders will be encouraged to apply to become signatories to the Code and this template could also be used by non-bank SME lenders that aren’t fintechs.

SME borrowers who look to borrow from code compliant lenders will be much better placed to answer three important questions being:

“Is this the right product for my needs?”

“Do I know exactly what it is going to cost?” and

“Do I know that I can’t get a better deal elsewhere?”

Whilst there is still work to be done, this is a significant step forward in ensuring fintech lenders engage with SME borrowers in a transparent and responsible manner. You can read the full Code document here.