The Australian, December 6, 2017
Fintechs have baulked at a proposal spearheaded by Small Business Ombudsman Kate Carnell to beef up rules covering how they lend money to fledgling enterprises.
The move, which industry sources said was led by the Square Peg-backed Prospa, comes amid renewed scrutiny of peer-to-peer lending by the corporate regulator, caused in part by its controversial new disclosure standard, RG97.
Peak body Fintech Australia was due to meet with Ms Carnell to discuss a draft report into small business disclosure practices last Friday, but this has now been put off until next Wednesday.
“Fintech Australia has asked us to postpone the roundtable for one to two weeks to allow further time to consider the draft report,” the ombudsman’s office said in an email sent to industry players last Thursday.
“We will circulate an updated draft incorporating comments that we have received.”
Ms Carnell has been working with Fintech Australia and small business advocate Neil Slonim on cleaning up the sector.
As The Australian reported last week, some players are charging small businesses sky-high loans while not providing an annual percentage rate so that borrowers can easily compare offerings.
A draft report prepared by Ms Carnell’s taskforce, seen by The Australian, recommends the industry set up a binding code of conduct, administered by the Australian Securities & Investments Commission, and agree to show annual percentage rates to would-be borrowers. A spokeswoman for Prospa, which has written about $500 million in loans, declined to comment.
A Fintech Australia spokesman said there was “universal agreement among our small business lenders last week that the proposed roundtable with the Ombudsman on December 1 was unlikely to be as productive as it could be, and therefore should be deferred”.
John Baini, chief executive of peer-to-peer lender TruePillars, blasted the delay. “We have little confidence that a code of conduct sponsored by Fintech Australia will reach the level of disclosure we are already operating to and that is why we are not a member,” he said. “It’s taken all year for no result and this latest delay is more of the same.”
As the industry mulls Ms Carnell’s report, ASIC has been conducting a probe of the peer-to-peer lending sector.
This follows initial surveillance last year that led ASIC in July to warn it had found cases of inadequate disclosure to both investors and borrowers.
Three marketplace lenders — SocietyOne, second-biggest player RateSetter and smaller participant MarketLend — confirmed ASIC’s renewed focus on the industry. News Corp has a shareholding in SocietyOne.
ASIC sent a voluntary survey to participants earlier this year, asking them for up-to-date statistics about their loan books, and is now in the field asking further questions.
The regulator’s concerns include compliance with its controversial new fees and charges disclosure standard, RG97, which is under review by an external expert following uproar among industry super funds that claimed it gave their retail rivals an unfair advantage.
RateSetter chief executive Daniel Foggo said the organisation was “just trying to figure out what that (RG97) means in terms of our disclosures”.
“We’ve just had to work through with ASIC how that works with a peer-to-peer lending book,” Mr Foggo said.
“It’s a pretty small update of our PDS that we will make.”
MarketLend founder Leo Tyndall said the company had overhauled disclosure on its website.
“We didn’t respond initially to the voluntary survey but we have since then been in dialogue with (ASIC),” he said. He said the industry could do a code of conduct itself, but previous attempts met with opposition from some larger participants: “We want a comparative price, we want it to be shown to the market so we can compare apples and apples.”