P2P lenders welcome FCA review

P2P lenders welcome FCA review




Peer-to-peer (P2P) lenders have responded to the Financial Conduct Authority's (FCA) decision to review the rules surrounding investment-based and loan-based crowdfunding.

The FCA was calling for input on whether financial promotions, due diligence and prudential standards were still appropriate for the way the market had developed.

It also wanted to consider whether to mandate in greater detail the disclosure firms are expected to give consumers and the time that the disclosures must be provided, while it also wanted to see whether platforms should be required to assess investor knowledge or experience of risks involved in this type of investment.

The regulator also wanted to seek views on how conflicts of interest were managed, whether the due diligence rules for platforms need to be strengthened and whether to mandate the disclosure of risk warnings in relation to non-readily realisable securities held with Innovative Finance Isas. 

“We introduced rules in 2014 to ensure consumers were protected without preventing the market from enhancing competition through expansion and innovation,” said Christopher Woolard, Director of Strategy and Competition at the FCA.

“Since then the market has grown rapidly and we want to explore concerns that have been expressed about developments in some aspects of the market. 

“We believe now is the right time to consider whether our requirements remain appropriate and that we have the right rules to support the development of this dynamic market by ensuring consumers are adequately protected.”

John Goodall, CEO and Co-Founder of Landbay, welcomed the move stating: “Crowdfunding is a broad church, with a rapidly growing congregation, but the umbrella term is being used to describe an increasingly wide range of financial products, and risks misleading investors. 

“A clear example of this would be equity crowdfunding and peer-to-peer lending, which are entirely different forms of investment with completely different risk profiles.”

Rhydian Lewis, CEO of RateSetter, added: “This review is a fantastic opportunity to look at the issues that really matter and put beyond doubt the case for opening up direct access to investment returns from the asset class of loans.”

“Peer-to-peer investing is becoming very popular and it makes sense for the FCA to ensure it is appropriately regulated. 

“We look forward to continuing our active and positive engagement with the FCA during the review process.”

Finally, the Peer-to-Peer Finance Association (P2PFA) said its lending platforms had a proud record of embracing regulations, but warned the challenge this review faced was to make sure the regulatory regime developed in a way that focused on the risks to consumers and any risks to the wider financial system of peer-to-peer lending.

“If platforms are to continue to be able to compete with powerful, large incumbents, then the regulator must strike the right balance and ensure that regulation is proportionate to the risks posed,” stated Christine Farnish, Chair of P2PFA.

“The growth of peer-to-peer lending has placed this sector firmly in the mainstream of financial service innovation. 

“As an association, we have always embraced an appropriate level of regulation, and we look forward to contributing authoritatively to the debate.”

The FCA is asking for responses by 8th September 2016. 

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