ASIC Survey Highlights Lack of Transparency in the Determination of Interest Rates

On 1 June 2017, ASIC released the results of its survey of marketplace lending providers. The report gives an interesting overview of the marketplace lending industry in Australia - in particular, its structure and size. In paragraphs 138 and subsequent ASIC observes comments on feedback from participants on emerging trends and issues and highlights including:

• lack of uniformity and transparency in the determination of interest rates, which compromises comparability between different loan products
• public awareness and understanding of the industry more generally.
• non-application of National Credit Code Protections for SME borrowers.

ASIC makes various recommendations for the sector, including making sure that:

• investors are referred to the marketplace lending information available on ASIC's MoneySmart website
• investors are provided with an appropriately designed risk warning statement before making an investment
• investors are provided with an optional 'knowledge test' to assess their understanding of the product before they invest
• provide additional information on the website of marketplace lenders.

As most marketplace lenders operate under a managed investment scheme model (either regulated or unregulated) it is likely that ASIC has or will have the power to be in a position to enforce its recommendations. This is particularly so given the recent amendments to unfair contracts legislation.