Australian alternative small business lender Prospa is hoping to start the new year off right, announcing that the company will adhere to the industry's co-called Code of Lending Practice, a voluntary code for alternative lenders to promote fair terms and customer protections.
Reports in Crowdfund Insider on Sunday (Jan. 6) said Prospa began operating in compliance with the Code as of Jan. 1, 2019, joining other industry players including OnDeck and and Capify. The code emerged following criticism from Australian watchdogs over the industry's high interest rates, lack of transparency and other questionable practices.
Prospa became the center of much of that scrutiny last year when it suddenly nixed plans to go public amid regulatory criticism of business loan contracts. The June decision was then followed by the Australian Securities and Investments Commission's (ASIC) efforts to curb practices by the company the watchdog dubbed unfair. Reports in September said the ASIC forced Prospa to change its customer contracts, which had previously required small and medium-size businesses (SMBs) to compensate Prospa for losses related to its own “fraud, negligence or willful misconduct,” while the ASIC also imposed requirements for Prospa to provide a 60-day notice to small business borrowers of any changes in fees.
The alternative lender is now introducing a SMART Box, a standardized and clear display for small business borrowers to see key metrics and a rundown of the total cost of their loan. The company said that all borrowers will receive a SMART Box with their loan contract.
“Our focus has always been on putting customers at the heart of our business and doing the right thing by them,” said Beau Bertoli, Prospa joint CEO and co-founder, in a statement. “The introduction of the SMART Box to all of our loans will make it even easier for small businesses across Australia to review and compare unsecured small business loans to support their business.”
He added, “We continue to encourage other small business lenders in the industry to engage with the AFIA [Australia Finance Industry Association] and sign up to the Code of Lending Practice.”