THE FINANCIAL Conduct Authority (FCA) is bringing the peer-to-peer sector into line with mainstream lenders under its rules for assessing creditworthiness in consumer credit.
In a policy statement the FCA said its rules in relation to P2P platforms are broadly parallel to those for other lenders.
In addition, the City regulator has proposed to extend the creditworthiness requirements to include a significant increase in the amount of credit or the credit limit under a P2P agreement, to address an anomaly in the current regime.
“Respondents were broadly supportive of our proposals, and welcomed the extension of the creditworthiness requirements to credit limit increases under P2P agreements,” the FCA said in the policy statement.
“Respondents argued that credit provided through P2P agreements should be subject to the same creditworthiness requirements as other types of credit.
“We agree that borrowers should be afforded the same protection when provided with credit under a P2P agreement as with other types of credit.
“In view of the broad support for our proposals, we are therefore proceeding with these changes.
“While we recognise that setting out the requirements on P2P platforms separately in our rules has increased their length, we consider that this provides more clarity for the P2P sector and will be easier for firms to follow, facilitating compliance.”
Changes to creditworthiness rules will come into force on 1 November this year.
The FCA says it wants to make a reasonable assessment, not just of whether the customer will repay, but also of their ability to repay affordably.
“Creditworthiness assessment is not an exact science, and we recognise that affordable loans can become unaffordable due to a change in the customer’s circumstances or wider economic events,” said the FCA.
“It can also be affected by how the customer operates the agreement and organises their finances, which may be influenced by behavioural biases or low financial capability.
However, we do expect firms to have effective processes in place aimed at eliminating lending that is foreseeably unaffordable.”