Marketlend’s Tyndall lashes online lending code as ‘window dressing’

This article was originally published by The Australian on 30/04/19 at this link, by Joyce Moullakis.

Peer-to-peer lender Marketlend has taken aim at an online business lending code of conduct, labelling it “window dressing”, and saying practices at several smaller firms were “more ruthless than the big banks”.

Marketlend’s founder Leo Tyndall said his company had decided against signing up to a new Australian Finance Industry Association Online Small Business Code of Lending Practice because he sees a number of shortcomings in the document.

“It’s (the code) been written by lenders without the borrowers being protected,” he said, referring to the need for transparency around interest rates being charged and hidden penalties for repaying a loan early. “It is not sour grapes on our part. If we are going to do a code, let’s do it properly.”

The Hayne royal commission’s final report — released in February — called for amendments to the law to make industry codes enforceable and approved by the Australian Securities & Investments Commission.

Treasury then released a consultation paper which outlined questions to inform the development of legislation which would see the government implement the royal commission’s recommendation. Submissions closed on April 12.

“Ultimately, the reason for a code of conduct is to hold organisations accountable,” Marketlend’s submission said.

“This can only be achieved if penalties are meaningful … Without enforceable penalties, industry codes aren’t worth the paper they’re written on.”

The submission went on to say all licensees regulated by ASIC should face “tangible penalties” if their conduct ran counter to a code of practice.

Marketlend is an online marketplace that provides trade credit by connecting borrowers and investors.

The AFIA website lists start-ups and fintechs Capify, GetCapital, Lumi, Moula, OnDeck, Prospa and Spotcap, as having a code-compliant online business loan products. But that is a fraction of the broader industry.

The code became operational on December 31 and includes reference to a tool called the SMART Box to facilitate comparisons of different online lenders’ small business loan products.

The AFIA code is being overseen and governed by an independent compliance committee.

Where a breach has been established, the committee may implement sanctions, such as requiring rectification, issuing a formal warning or revoking code membership. Mr Tyndall is of the view these sanctions don’t go nearly far enough. “Where possible, noncompliance should be referred to ASIC,” he said, of any breaches to codes of conduct.

Mr Tyndall added that if a more meaningful code — and one which encompassed many types of business credit — was established it should be written in plain English and be mandatory.

Prior to starting Marketlend in 2014, Mr Tyndall had stints as UniCredit’s head of capital markets in Asia Pacific, a director at National Australia Bank and a manager at RAMS Home Loans.

He has also hit out at some players in the online small business loan market for not being transparent in their pricing, undertaking a proper serviceability assessment and trying to lure business by paying brokers upfront fees of 4 to 6 per cent.

“They are holding themselves out to be better than the banks but to the contrary … they are more ruthless than the banks.”

Marketlend believes the industry could benefit from a comparison rate, which has been used in the mortgage market for more than 15 years. It bundles fees and charges into an interest rate that customers can compare on a like-for-like basis.