THE UK’S ongoing consumer debt crisis is not the fault of alternative lenders, according to the ex-regulator at the head of the Peer-to-Peer Finance Association (P2PFA).
Speaking exclusively to Peer2Peer Finance News, P2PFA chair Christine Farnish (pictured) said that it was wrong to link skyrocketing levels of consumer credit with the rise of peer-to-peer lending and instead pointed the blame at high street banks. However, she warned P2P lenders that the high-profile topic only proves that they must be “absolutely scrupulous about their operating.”
“It is a high-profile issue at the moment and there have been some things going on out there – particularly among bank lenders and the car industry but maybe some alternative lenders as well,” said Farnish. “It does need looking at.
“The important thing for P2P lenders is to be absolutely scrupulous about their operating. It’s something that we don’t major in at the moment so it will be interesting to see if the Financial Conduct Authority (FCA) might cover this.”
Earlier this year, the FCA revealed that unsecured consumer credit had hit £200bn for the first time since the global financial crisis. According to the FCA’s chief executive Andrew Bailey, this comprises £68bn of credit card debt, £58bn in motor finance, £15bn in various forms of higher cost credit, and £7bn in overdraft credit. The rest is mostly unsecured personal loans.
In response, the Bank of England’s Financial Policy Committee said that the rapid growth of consumer credit was “a pocket of risk” in an otherwise benign domestic credit environment, and warned that banks could face bills of £30bn as a result of loan defaults.
“I don’t think it’s specific to alternative lenders at all, but I think the regimes do need to tighten up elsewhere in the market,” said Farnish. “I really don’t think that P2P lenders are the culprits here. It’s the mainstream lenders that have perhaps been too relaxed about some of their products and we need to get the evidence and get the facts out there.”
This news story featured in the November edition of Peer2Peer Finance News – now available to read online!