FIBA announced that it would include lenders’ extension and default rates in its online lender directory following industry concerns about the transparency of these charges.
At the Association of Short Term Lenders (ASTL), one of our key objectives has always been to achieve greater transparency in the industry, and this is precisely why we amended our code of conduct for members as long ago as January 2017.
We did so to ensure all ASTL members that apply an alternative higher interest rate in certain circumstances, such as the default of a loan or in the case of term expiry, must make this clear and transparent in all of their documentation. This includes indicative or quotation terms, as well as in the actual loan documentation itself.
This approach is a best practice that is followed by all ASTL members, but there are lenders that are not members of the Association and we also have a responsibility to encourage those lenders to meet these minimum expected standards.
There is no place in the bridging market for excessive charges, but there is also no need for price regulation. Such intrusive regulation would put a stranglehold on innovation and be a backwards step. In a free market, customers have the choice whether or not to pay a particular price. But they can only make this decision based on the information they are provided, and this is what the transparency of fees and charges is so important. If we can develop a culture that encourages the clear labeling of all fees and charges from the outset, we will create an environment of self-regulation, where those lenders whose charges are excessive compared to the market, will simply not win business and so pricing will find an appropriate level.
Transparency is key, and when the spotlight falls onto default rates, lenders and intermediaries should be in a position where they have nothing to hide.