Do you know how the FCA protects P2P lenders?
- While the US has one of the largest P2P lending markets in the world by loan volume, the UK’s is not far behind on a per capita basis [1]
- We believe that a positive regulatory environment has helped nurture the UK’s P2P lending market.
- The new consultation proposed by the FCA in its recent regulatory review of P2P lending promises to be a positive step forward for P2P lenders.
According to Altfi¹, the UK P2P lending market is worth just over £13 billion compared to nearly £65 billion in the US. Yet the UK P2P lending market similar in size to the US on a per capita basis. In our opinion, the UK has achieved these impressive alternative lending volumes in part because regulations are very supportive to alternative lending and because the Financial Conduct Authority (FCA) has done a fantastic job in terms of educating and protecting consumers in the peer-to-peer market. The FCA introduced new rules regulating the peer-to-peer finance industry in April 2014. The rules set standards for capital requirements, business conduct, the protection of client money, and countless other subjects. There was a strong emphasis on the transparency and availability of information on peer to peer lenders, particularly relating to the risks and rewards involved in P2P lending. This made it easier for both lenders and borrowers to make informed financial decisions.
In its recent regulatory review of P2P lending, the FCA has announced a new consultation as it looks to firm up compliance for UK online lenders. The new consultation promises to be a positive step forward for P2P lenders. Sacha Bright, chief executive of Businessagent believes that ‘the consultation suggests measures that will have a significant impact on the P2P industry, particularly in relation to the way that the risk of loans and platform business models are assessed.’[2]
‘All platforms are required to ensure their communications are fair, clear and
not misleading and are required to explain to investors the nature and risk of the investment’.
– FCA Regulatory Review of P2P Lending, July 2018[3]
What does this mean for peer to peer lenders?
We certainly welcome the review and added scrutiny of the UK P2P landscape. From a lender’s perspective, this is a positive step towards an increased level of transparency. Gillian Roche-Saunders, a partner at the law firm of Bates Wells Braithwaite – and Fintech expert, said this will be ‘the foundation of a much more sophisticated and targeted supervisory approach from the regulator.[4] She also said, ‘The FCA’s proposals for the P2P sector herald a drive for a whole new standard of governance.’ [5]
‘We want to be not the biggest, but the best P2P lender, and a key to achieving this is putting customers first’.
– Yann Murciano, Blend Network CEO
How is Blend Network complying with FCA regulations?
At Blend Network, our business is built around customers and their needs because ultimately, our ambition to become not the biggest, but the best peer to peer lender depends on our customers’ satisfaction. A big part of what we do is aimed at ensuring that our customers understand the risks of P2P. How do we do this? 1) by being clear on what customers can expect every step of the way, 2) by ensuring lenders are given detailed information on each loan in a comprehensive information pack, and 3) by onboarding lenders only after they have successfully passed an appropriateness test to ensure they understand the risks of peer to peer lending.
We strongly believe in a well-regulated industry. The FCA has worked extremely hard to set the high standards that currently exist in the UK P2P industry. The more that can be done to make sure all P2P lending platforms have these standards, the better.
Let us know what you think by leaving your comments below.
And keep an eye on our upcoming pipeline of exciting new loans by registering at www.BlendNetwork.com #LendWithBlend
[1] https://www.altfidata.com/marketdata/ (the $84 billion loan volume has been converted into £ by using the USD/GBP rate as of August 20th, to make it like-to-like.
[2] http://www.p2pfinancenews.co.uk/2018/07/27/heres-what-the-industry-thinks-of-the-fca-review/
[3] https://www.fca.org.uk/publication/consultation/cp18-20.pdf
[4] https://www.crowdfundinsider.com/2018/07/137075-zopa-ceo-jaidev-janardana-welcomes-fca-regulatory-review-of-p2p-lending/
[5] http://www.p2pfinancenews.co.uk/2018/07/27/heres-what-the-industry-thinks-of-the-fca-review/
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