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Peer2Peer Finance News | November 21, 2017

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The FCA shouldn’t tar P2P with a single brush, says Octopus Choice

The FCA shouldn’t tar P2P with a single brush, says Octopus Choice
Suzie Neuwirth

OCTOPUS Choice has called for the City watchdog to force peer-to-peer lenders to make a clear distinction between secured and unsecured lending in its upcoming review of the sector.

The P2P lender, which was spun out of Octopus Investments in April 2016, offers property-backed loans that are underwritten by another lender under the Octopus umbrella, Octopus Property.

“As well as providing a customer friendly format for the publication of default rates and capital losses, we would encourage the Financial Conduct Authority to insist that providers label their products to make clear the distinction between secured and unsecured lending,” said Sam Handfield-Jones, head of Octopus Choice.

Read more: Octopus Choice IFISA attracts 100 investors in week since launch

“The former is arguably less risky because if a borrower defaults on their loan, the investor has a claim on an asset – such as a property – that can be sold to pay back some or all of the debt.

“Property-backed lending constitutes one of the oldest asset classes around and for those investors looking to avoid the ups and downs of the stock market, it could provide an answer.”

Read more: Octopus Choice targets £200m of lending in two years

Handfield-Jones also urged the regulator to recognise the diversity of the industry, arguing that it “shouldn’t be tarred with a single brush”.

“We believe that the P2P lending sector will and should provide real competition within the financial services sector and we hope that the imminent review recognises the diversification of the market and creates a clear framework, allowing customers to make informed investment decisions,” he said.

It was thought that the FCA’s review was going to be published this summer, but it seems the sector will have to wait a little longer for the regulator’s findings. In its interim feedback last December, the watchdog expressed concerns about the way platforms were marketed to consumers and signalled a crackdown on the sector was imminent.

Read more: How can the P2P sector win over advisers?