THE FINANCIAL Conduct Authority released its long-awaited review into the peer-to-peer lending sector on Friday. Here are some of the industry reactions so far…
Jaidev Janardana, chief executive of Zopa
“As the founder of the P2P industry, we are always in favour of measures that move forward its maturity and allow responsible growth. We welcome the insight and recommendations that the FCA released today, as we believe it’ll provide more alignment of how customers should be treated within the industry.
“We operate with customer interest at the forefront of our business and as such the spirit of these regulations – which seek to ensure that customers are well informed and treated fairly – are in line with our own ethos. While we are still digesting the detail, we believe that the measures will not represent significant change from how we operate today.
“Following this review, we will continue to work collaboratively with the FCA and with our customers to ensure we provide the best possible services and products.”
Rhydian Lewis, chief executive, RateSetter
“I believe peer-to-peer lending will become a part of every investor’s diversified portfolio and the proposals from the FCA do not change that belief.
“I welcome this consultation paper because the clearer the regulation, the better chance peer-to-peer lending has of becoming meaningful competition to the banks.”
James Meekings, co-founder and UK managing director of Funding Circle
“Funding Circle has consistently campaigned for proportionate regulation that protects consumers, whilst allowing innovation to boost choice and competition in the lending and investment markets.
“We welcome today’s review as we believe it sets out to do that, and we look forward to continuing to work together to offer alternative and transparent investment opportunities for investors, and access to finance for small businesses.”
Stuart Law, chief executive at Assetz Capital
“While we have just received this latest FCA consultation document, and therefore have not as yet fully digested it, we will always be supportive of any regulation that ultimately benefits our investors, borrowers and the wider peer-to-peer industry. Proposals that advocate greater transparency, appropriate investor remuneration and good corporate governance are very much welcome.
“We will respond to the consultation in due course. In the meantime, we will continue to operate and develop our own industry-leading and rigorous standards.
“However, we do caution against a blanket move towards peer to peer lending adopting the same restrictions on marketing that investment-based equity crowdfunding platforms must utilise. Equity investment is a very different proposition to loan investment when carried out well.”
Gillian Roche-Saunders, partner at BWB Compliance
“The FCA’s proposals for the P2P sector herald a drive for a whole new standard of governance.
“While some criticism about platform conduct has not come as a surprise, and many platforms were already improving disclosures, the FCA’s reference to consumers not getting returns that compensate them for the risk that they are taking may be causing some nervousness.
“The new proposals on wind-down procedures are of particular interest. We have seen many iterations of the standards expected in this area and yet more change is now afoot, with the FCA taking a leaf straight from the banking regulation playbook. With ringfencing and resolution manuals on the menu, the P2P industry could be seeing considerably higher levels of regulation than other platforms.”
Paul Smee, chair of the Peer-to-Peer Finance Association
“The Association has always maintained that all investors lending through a peer-to-peer lending platform need to be clear about the performance of the platforms on which they invest. That is why P2PFA members have set out and signed up to Operating Principles which give a gold standard for disclosure. We are pleased that the FCA’s proposals endorse the idea of full disclosure.
“There is a lot of detail in this document, and we will be working through its implications, to ensure that the eventual regime is practical, proportionate and allows for the development of a healthy and competitive market in peer-to-peer lending. Peer-to-peer lending needs to make its full contribution to the growth of the UK economy and we will be working to ensure that new regulatory requirements do not get in the way.”
Julia Groves, partner and head of crowdfunding at Downing
“The FCA paper is a crucial development for the whole industry as it moves into the mainstream through the launch of the Innovative Finance ISA, which offers access to both P2P and Crowd Bonds.
“But to survive in the mainstream, the industry needs to help both investors and their advisers understand where the different types of crowdfunding sit on the risk scale compared to other traditional investments.”
The UK Crowdfunding Association (UKCFA)
“The UKCFA welcomes the publication of the long-awaited FCA review of crowdfunding and P2P lending. The process of the review has involved giving the FCA unprecedented access to our customer data and senior managers to examine all elements of the diverse range of businesses which make up this growing and important sector of financial services.
“Throughout the process, the UKCFA has emphasised the need for the FCA to enforce – and be seen to enforce – the rules which govern all investment firms dealing with ordinary peoples’ money to ensure the sector maintains its world leading status in terms of innovation and consumer protection.
“We would still emphasise the need for the FCA to improve its use of technology to make monitoring an online sector more effective and efficient and not to rely on the sharp eyes of UKCFA members highlighting examples of poor or even illegal practice in the investment world.”
Sacha Bright, chief executive of Businessagent
“The consultation suggests measures that will have a significant impact on the P2P industry, particularly in relation to the way that the risk of loans and platform business models are assessed. Whilst this is a consultation document and we would expect some changes before implementation what is very clear is that the FCA believes some platforms are over-charging, under-delivering and failing to disclose the right information – whether that relates to risks or the performance of the underlying loans.
“We have been calling for standardised and comparable disclosure of default rates and data that shows yields achieved not just estimated for years now. It is not difficult for the platforms to provide this information. Working with aggregators they could do so within weeks and we hope that they highlight their commitment to investors by not waiting for rule changes to do so.”