Fintech Association for Consumer Empowerment (FACE) is planning to set up a three-member enforcement committee to look into compliance lapses by financial technology companies by end of FY23, said Chief Executive Officer Sugandh Saxena.
The proposal of the committee comes on the back of Reserve Bank of India(RBI) Governor Shaktikanta Das’ recent comments where he urged fintechs to evolve industry best practices, align privacy and data protection norms with the laws of the land, set standards to avoid mis-selling, promote ethical business practices and transparency of pricing. A couple of weeks back, Das has proposed setting up a self-regulatory organisation for fintechs.
“We are already approaching right candidates for the committee. There is a terms of reference that is already part of our charter. I think the committee should be in place by the end of this year,” she said, adding that the committee will have a “good mix” of people who are not only focussed on customer protection, but also have an understanding of the financial services sector.
Currently, 47 companies are a part of FACE of which, 44 are lenders. Companies like Fibe, KreditBee, and Paisabazaar are part of the industry body. Around 80% of overall disbursements volumes in the digital lending industry is generated by FACE members.
The committee will be independent and not have any representation from FACE members. It would assess and review instances of compliance lapses by financial technology companies, and then take appropriate action.
The process will include education, detection, and if required, termination the membership if they do not follow the code of conduct willingly.
Earlier this week, the industry body released its revised code of conduct for digital lenders. The previous version was released in December 2020, before the Reserve Bank of India (RBI) digital lending guidelines were issued.
Saxena said that there has been a lot of learning in the last three years, in terms of what is good or wrong with the industry particularly when it comes to data protection norms, cyber security risks etc. And the attempt will be to build on the understanding of the industry. That is, a lot of incumbents have come into digital lending industry in recent years and hence, a much more spelled out version of the code that gives details in a more granular manner is required.
The code of conduct has been prepared by assessing existing customer surveys, examining similar guidelines in other countries, and by taking feedback from policy research organisations like Dvara Research.
Adherence to the code of conduct is a pre-condition for entry into FACE. Additionally, the industry body will also monitor compliance through independent verification of company documents.
While digital lending volumes have risen sharply in recent times, instances of borrower harassment by some loan applications have also come to light.