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Peer2Peer Finance News | August 24, 2019

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FCA applications have cost the P2P sector up to £2m

FCA applications have cost the P2P sector up to £2m
Marc Shoffman

THE FINANCIAL Conduct Authority (FCA) has pocketed up to £2m from full authorisation of the peer-to-peer lending sector, figures suggest.

A freedom of information request by Peer2Peer Finance News shows that the City watchdog has considered 146 applications for full permission from P2P platforms since 2014 – when the FCA took over regulating the sector – with firms paying application fees of £600 to £15,000 depending on their income at the time.

This reveals that the regulator has raised up to £2.1m if all firms paid £15,000, or a minimum of £87,600 if all firms paid the lowest fee of £600.

The response does not detail how many applicants were approved or rejected, but firms must pay regardless of the outcome.

According to the regulator, consumer credit firms applying for authorisation must pay a fee that is calculated on their income and how complex their business model is.

At the lowest end of the scale, those deemed straightforward with income of up to £50,000 pay just £600, but at the highest end, firms seen as complex with income of more than £1m pay £15,000.
The FCA declined to provide a definitive figure but said the money is used to cover the time and costs of processing and considering the applications.

Read more: LendInvest cancels application for P2P authorisation

However, some platforms have expressed concerns that the watchdog has been able to sit on these funds while quickly authorising newer brands and keeping established lenders waiting months for a decision, when they will potentially be losing market share.

For example, Frazer Fernhead, founder of The House Crowd, which launched in 2012, said the property P2P platform applied for full authorisation in October 2015, paying around £10,000, and was still waiting at the time of going to press.

“The regulatory process hasn’t treated older companies fairly,” he said. “We have lost first-to-market advantage.

“The new companies should really have gone to the back of the queue.”

Established names such as Zopa and Funding Circle had to wait around 18 months and only recently gained full authorisation, while smaller players have been able to trade and offer an Innovative Finance ISA (IFISA) for more than a year.

Read more: Zopa gains full FCA approval

However, Filip Karadaghi, chief executive of LandlordInvest, which gained full authorisation in December 2016 and launched an IFISA in January 2017, highlights the advantage more established names had by being able to trade on interim permission if they had launched before April 2014.

“The major firms were trading with an interim permission, whilst many firms that did not hold an interim permission or full FCA authorisation could not trade at all,”he said.

“We spent two years waiting to become fully FCA authorised, as we applied in December 2014 – by which time there was no possibility of applying for interim permission so we could not trade during that time, and arguably were unable to gain any market share.”

Julian Cork, chief operating officer of Landbay, which launched in 2014 and gained full authorisation in December 2016, said it is unfair to compare waiting times as all business models are different.

“We support full regulation and the FCA’s forensic approach which ensures best practice is adopted by all platforms, large or small, old or young,” he said.

The FCA said: “The application fee is not intended to cover the full costs of this work as it is not intended to be a barrier to entry and the unrecovered costs are borne by the existing fee payers.”

Read more: Landbay wins FCA authorisation