Blog | RateSetter

Review of peer-to-peer lending regulations

By Luke OMahony

In July, we blogged about a review of peer-to-peer lending rules being undertaken by the financial regulator, the Financial Conduct Authority (FCA). The review looks at whether the rules introduced in April 2014 to govern peer-to-peer lending are working effectively.

At the end of last week, the FCA published an update on this work. The update runs to 43 pages, and covers equity crowdfunding as well as loan based crowdfunding. The FCA has also published a short summary, which you can read here.

One of the key points raised is that “it is difficult for investors to compare platforms with each other or to compare crowdfunding with other asset classes due to complex and often unclear product offerings”. We agree – that’s why, as a founding member of the P2P Finance Association, we have worked to set high levels of disclosure and transparency surpassing those elsewhere in financial services, and recognise the importance of continually improving the data that we publish. We also think that it would make good sense for the wider peer-to-peer sector and finance industry to adopt this approach to disclosure, making comparisons easier for investors.

The FCA also note that “certain features, such as some of the provision funds used by platforms, introduce risks to investors that are not adequately disclosed and may not be sufficiently understood by investors”. We are proud to be leading the way on transparency and disclosure of information on our Provision Fund, including filing audited accounts for the fund each year, and we welcome efforts to improve transparency across our sector in this area.

We’ll continue to work with the FCA to ensure that our market works in the interest of investors and borrowers.  The FCA has said that it will continue to gather information into early 2017, at which point it will decide whether to consult on any proposed amendments to the rules.

If you have any comments or questions relating to the review, then as always, please feel free to contact us.