The UK's Financial Conduct Authority has called for improvements in digital loans processes to help people better understand what they're signing up for.
Ina review into the sector, the watchdog found that design of digital platforms can encourage customers in a specific direction and can influence their understanding of products and features.
When used well, this can support good consumer outcomes, but, says the FCA, customers can also be driven towards making quick decisions which may not be in their best interests or consistent with expectations under Consumer Duty rules.
The regulator found some lenders were using shorter, simplified language and providing explainer videos that helped customer understanding.
However, the design of some digital loan processes lacked 'positive friction', which slows decision-making, and excluded information consumers needed, for example, on costs.
Positive frictions are sections of a consumer journey that can encourage consumers to pause and reflect, including check boxes, time delays and requirements for evidence declaration in the context of high-risk investing.
Alison Walters, director of consumer finance at the FCA, says: "Online and app-based applications can make it easier for people to get the credit they need to navigate their financial lives. But poorly designed applications could mean people bypass important information. We're sharing examples of what works and what doesn't, so lenders can better support their customers."