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Peer2Peer Finance News | October 18, 2017

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FCA extends credit assessment rules for P2P platforms

FCA extends credit assessment rules for P2P platforms
Marc Shoffman

THE FINANCIAL Conduct Authority (FCA) is proposing widening the scope of affordability assessments for peer-to-peer platforms as part of a wider review of the high-cost credit sector.

A consultation released by the City watchdog on Monday morning said there was a “gap in the regulatory” regime for P2P when a borrower asks for more credit or when a business is the lender rather than an individual.

Read more: FCA still considering “complex cases” for authorisation

The report said creditworthiness requirements will be extended to situations where there is a “significant increase in the amount of credit or the credit limit under a P2P agreement.”

This means if a borrower asks for more credit during an agreement, then a post-contract assessment will have to be made.

The FCA said further changes may be included in its post-implementation review of the P2P sector.

This consultation, which closes on 31 October, forms part of the regulator’s wider work on costs and affordability assessments in the consumer credit sector.

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

Feedback from the study showed P2P lending was among the lowest cost forms of borrowing, but the FCA expressed concerns about catalogue credit, overdrafts and rent-to-own.

The FCA said it would maintain a current cost cap in the payday loan sector and warned of more work to monitor charges for arranged and unarranged overdrafts.

“The FCA has published proposals that potentially have a significant impact on firms operating in the consumer credit sector,” John Coley, financial services risk director at PwC, said.

“These include proposed changes for assessing creditworthiness, feedback on its rules limiting so-called payday-loans, and insights into its continuing work into the motor vehicle finance sector.

“More widely, while the FCA notes the majority of existing affordability processes appear appropriate, it is nevertheless proposing changes as there is, ‘evidence both of under compliance with our rules but also of firms having procedures which may be unnecessarily costly or restrictive.”

Read moreFCA to toughen rules on P2P