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Peer2Peer Finance News | September 18, 2019

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Social P2P venture hindered by wholesale crackdown

Social P2P venture hindered by wholesale crackdown
Marc Shoffman

THE FOUNDER of ThinCats has said that the regulator’s clampdown on wholesale lending will affect projects that can be funded through his social peer-to-peer lending platform Community Chest.

Kevin Caley (pictured) launched the social enterprise last year and it funded its first loan in February 2017 for £130,000. The debt facility went to a local Birmingham finance company called ART Business Loans, which supports West Midlands enterprises.

Investors could take advantage of five per cent community investment tax relief (CITR) – a government scheme that encourages investment in disadvantaged communities by giving tax breaks to investors who back local businesses and other enterprises.

But Caley says the Financial Conduct Authority (FCA)’s tighter restrictions on wholesale lending mean that loans like these will no longer be possible, as the money was lent to another lender.

Read more: FCA to push for global fintech framework

“You will be aware of the recent FCA letter to P2P platforms saying that lending to businesses that on-lend it are no longer allowed,” said Caley.

“The decision is a serious problem.

“We believe that the FCA were trying to stop certain practices on other P2P platforms and we have been caught unintentionally.”

The City watchdog wrote to the chief executives of all the platforms in February to highlight that if a lending business borrows through a P2P platform and lends that money to others, it may be “accepting deposits” without the correct regulatory permissions.

As a result, Community Chest will focus on projects that are eligible for social investment tax relief (SITR) instead.

“SITR applies to loans to normal trading businesses that also happen to have social benefits,” said Caley.

Read more: RateSetter provides update on wholesale lending