RATESETTER has said it is in close contact with the Financial Conduct Authority (FCA) as it transitions to new arrangements with its existing wholesale partners, “which may take a few months to conclude”.
The peer-to-peer lender stopped taking on new wholesale partners last December, after it emerged that the City watchdog had concerns about the practice within the P2P sector.
“In autumn 2016 we identified a technical point of regulatory uncertainty around wholesale lending and flagged this to our regulator, the FCA, requesting clarification,” said RateSetter in an update on its website on Thursday.
“Around the same time, we took a strategic decision to wind down this lending in view of this uncertainty and because we had reached a scale at which writing loans directly had become comparably more efficient – we have invested in building up our in-house lending teams over the last two years and we are focusing on using that capability to originate loans directly to individuals and businesses.
“We have agreed a way forward with each existing wholesale partner and we are in close contact with the FCA to ensure that there is no customer detriment as we transition to new arrangements, which may take a few months to conclude; and over time existing wholesale loans will pay back as scheduled.
“The FCA has since confirmed that they agree with the technical classification of deposit-taking and we are keeping them informed as we wind down our existing wholesale lending.”
RateSetter added more details to its annual performance table earlier this month, introducing new sub-categories that include a breakdown of how much of the funds are channelled to wholesale lending.
Last month, the FCA confirmed its position on wholesale lending and highlighted that if a lending business borrows through a P2P platform and lends that money to others, it may be “accepting deposits”.
If the borrower does so without the correct regulatory permissions, this would involve a breach of the Financial Services and Markets Act (FSMA) and may be a criminal offence.
While in this incidence it would be the other lending platform in breach of the FSMA, it does have implications for the P2P platform, the FCA said.
The FCA called on P2P lenders to take four actions: to establish whether they have been lending to lending businesses without the required deposits permission; to stop lending to them if so; to consider what action they will take if it is currently happening; and to consider how they will avoid it happening in future.
It requested that platforms forwarded details of the actions they had taken by Tuesday 14 March 2017, including the details of the firms that were accepting deposits without the correct permission.