The nation’s three largest online small business alternative lending companies — OnDeck, Kabbage and CAN Capital — on Thursday (5.5.2016) announced the formation of an industry trade group. One of the first actions of the organization will be the launch of standardized price-comparison tools, standard explanations of borrower obligations, and greater transparency in information related to all fees and costs associated with loans.
According to a press release from the new Innovative Lending Platform Association (InnovativeLending.org), its formation and the launch of the new comparison tools came as a result of “findings from an industry study underscoring small business customer preferences and priorities.”
The comparison tool, called “Smart Box” (for Straightforward Metrics Around Rate and Total Cost), will enable potential borrowers to compare fees, annual percentage rates and other costs for loans of the same duration.
The formation of the association and announcement of the Smart Box can also be viewed as a form of self-regulation for an industry that has undergone rapid growth, but as we have shared previously, is attracting attention from banking regulators concerning the transparency of information provided to the borrower regarding all costs and fees related to the loans. The lobbying efforts of the new association, along with the availability of more transparency in the full costs associated with the loans, could help stall government regulations.
“We believe that this type of self-regulatory approach demonstrates the maturation of this space,” said Daniel Gorfine, vice president and associate general counsel of OnDeck.