No P2P applications to FCA rejected but most are withdrawn, data reveals

NOT A single application by a peer-to-peer lender for FCA authorisation was rejected outright since the regulator took over responsibility for the sector in 2014, but more than 80 per cent of applications were withdrawn.

The data was revealed in the FCA’s response to a freedom of information request in June this year. It shows that up to 13 June 2018, P2P firms submitted 373 applications for authorisation to the FCA, of which 310 were withdrawn, while none were rejected.

More recent information obtained by audit, tax and consulting firm RSM reveals that, as at 26 July 2018, there were 65 FCA-authorised P2P lenders and two P2P lenders with interim permission.

RSM said the numbers point to the FCA’s historically supportive approach to firms trying to secure permissions, although they seem to suggest that some firms are being asked to think again about their applications.

In a recent consultation on peer to peer lending and crowdfunding, the regulator noted it has seen some examples of “poor business practices we believe cause actual or potential harm” to consumers in a sector which is still maturing.

Damian Webb, RSM restructuring partner and a specialist in alternative finance, said the FCA’s approach to regulating the sector to date has been fairly light touch.

“Initially, the FCA anticipated that the standards of the wider UK financial sector would translate into consistent and transparent standards being applied in the P2P space,” Webb said.

“However, the FCA probably didn’t appreciate the extent to which so many of the key players were ‘alternative’ to the established financial sector with many of them being young, entrepreneurial and coming from a tech rather than financial background. This has led to many of the practices and behaviours of the peer to peer sector being inconsistent and sometimes at odds with best practice.

“The recent consultation seeks to address this inconsistent behaviour and ensure best practice is followed. This has to be commended, and it is particularly timely given that the historically benign credit conditions appear to be changing.

Webb also predicted that a stricter regulatory environment coupled with tougher credit conditions means “it will only be a matter of time” before some P2P lenders are censured by the FCA.

Read more: FCA brings P2P creditworthiness rules into line with mainstream