The Indonesian FinTech Association (Aftech) recently published a code of conduct providing guidance on ethical and responsible behavior (the code) for peer-to-peer financial technology (fintech) lending platforms that are registered or licensed by the Financial Services Authority (P2P firms). Fintechs that support P2P firms and are Aftech members (P2P supporting firms) will also be subject to the code, which will be de facto binding in nature. The code can be found on Aftech's website here. Dewi Negara Fachri & Partners has produced an unofficial translation here.

The objectives of the code are:

(i) to provide greater transparency in fintech transactions;
(ii) to prevent over-extension of credit by lenders; and
(iii) to encourage good faith dealings.

The key provisions of the code are:

1. General disclosure
P2P Firms are required to disclose, among others

• all costs of borrowing, reflecting the actual amount (rather than a percentage), including: upfront fees, any service charges to be deducted from the amount borrowed, interest, insurance costs, late and early repayment fees, taxes, and any other fees;
• risk grades and ratings for offered loan facilities, along with applicable interest rates and the basis of calculation (i.e. compounded/flat/annualized percentage rate, etc.);
• that the lender will bear the risk of payment default by the borrower, and that the borrower (rather than the P2P firm) is liable upon default;
• details of the virtual and/or escrow account used for the loan (as registered with the Financial Services Authority (OJK));
• the P2P firm's official name and address, email, and a staffed contact telephone number for complaints.

2. Advertising
P2P firms are prohibited from providing misleading information that may induce a lender or borrower to use a P2P firm's services. This prohibition extends to advertising which either implies an endorsement by any individual/group or contains misleading statistics or data. Where a P2P firm chooses to disclose the number of non-performing loans (NPLs) on its platform, it is also required to define what an NPL is and how they have been calculated.

3. Complaints
All P2P firms must have procedures and dedicated staff for complaints-handling. Outsourcing of complaints-handling is permitted.

4. Creditworthiness
P2P firms are required to evaluate a borrower's creditworthiness and have a verification system in place for accurate assessment. P2P firms are also prohibited from manipulating data to improve a borrower's chances of obtaining a loan, regardless of borrower consent.

5. Predatory lending prohibitions
P2P firms are prohibited from imposing unreasonable terms, conditions, interest and/or fees upon borrowers, as well as from employing deceptive lending tactics. "Unreasonable" terms will be dependent upon borrower creditworthiness, and Aftech is to form a working group to assess reasonableness for loan products offered by P2P firms.

P2P firms are also prohibited from increasing loan amounts without prior approval from the borrower.

6. Data protection
P2P firms should collect only such personal data relevant to the services provided, and for which the borrower or lender has given consent. The use of personal data must be in line with the consent provided.

7. Debt collection
P2P firms are prohibited from using third-party debt collectors who have been blacklisted by the OJK or Aftech. Debt collection methods involving intimidation, cyberbullying, and violence are strictly prohibited.

8. National financial literacy and inclusion program (FL Program)
The FL Program, an OJK initiative, aims to improve financial literacy throughout Indonesia by means of financial education and the development of social infrastructure. Pursuant to existing legislation, a P2P firm is only required to improve the public's financial literacy and inclusion. Supplementing current legislation, the code specifically requires P2P firms to support and implement the FL Program through partnerships with other P2P firms, or with the OJK.

9. Sanctions
P2P firms who do not comply with the code will be subject to the following sanctions:

• written warnings
• notification of the non-compliance to the OJK and to the public
• suspension or termination of Aftech membership

The Aftech Ethics Council will supervise the implementation of sanctions after consultation with the OJK.

Conclusion
The code supplements and complements existing legislation. It is encouraging to see an industry group take the initiative in consumer protection, fill the gaps in OJK supervision, and impose stricter standards that what is legislatively prescribed. It remains to be seen how Aftech exercises its broad discretion and how Aftech suspension or termination translates into enforcement by the OJK. Given that Aftech does not have the authority to suspend fintech activities, the OJK is expected in time to issue regulations to provide Aftech with a degree of regulatory backing.

Several provisions in the code refer to potential updates which indicate that Aftech will be closely monitoring market acceptance and developments, and will likely adopt a pragmatic approach to supervision of P2P firms and P2P supporting firms. We also expect to see further provisions concerning audits; trust marks for compliant P2P firms; and the manner in which P2P supporting firms present information to the public. We will provide further updates on these as they become available.

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