NEW proposals to oversee peer-to-peer lenders under home finance rules if they start offering residential secured loans have been hailed as a “vindication” of the P2P property sector.
In a consultation paper on the P2P sector released last week, the Financial Conduct Authority (FCA) said that it is aware that some P2P platforms are considering moving into home finance products.
As P2P lenders are currently not regulated under the FCA’s Mortgage and Home Finance: Conduct of Business sourcebook (MCOB) rules, the watchdog is concerned that its customers would not receive the same level of protection as they would from conventional residential mortgage providers.
Therefore it has proposed extending MCOB rules to P2P platforms if they begin offering home finance products.
The proposal has been welcomed by Lee Birkett, founder of the P2P platform JustUs, which recently applied to be in the FCA’s sandbox for secured home finance lending.
“The FCA consultation CP18/20 is a great piece of work,” said Birkett. “The proposal to include regulated home finance lending (mortgages) for P2P platforms like JustUs is real vindication of our future plans.”
JustUs offered mortgage loans for a brief period in 2015 but was asked to stop. In January 2018, it applied to join the FCA’s sandbox which would include adoption of the regulator’s mortgage rules.
“We’ve been wanting to [move into home finance loans] for four years,” said Birkett. “We’d like to start offering them again now. For me, it’s a transformational fintech movement. It provides huge liquidity options in the event of any financial crisis and/or financially excluded borrowers.”
In the consultation paper, the FCA proposed applying “the responsible lending and financing rules” to P2P home finance providers, to protect customers from irresponsible or unfair lending practices.
Other rules that could be extended to P2P relate to the protection of vulnerable customers in the event of a payment shortfall, levels of disclosure about the home finance product, fees and charges and data reporting.
The FCA is now accepting industry feedback on how P2P platforms should be regulated if they move into the home finance sector.