THE FINANCIAL Conduct Authority (FCA) has signalled it may be concerned about inappropriate sales tactics in peer-to-peer lending.
The City watchdog’s 2019 sector review – which gives an indication of its business focus over the year – included P2P lending in a section warning about consumers falling into unsuitable investments.
“These products include contracts for difference, spreadbetting, structured products and investment-based crowdfunding and loan-based (‘peer-to-peer’) crowdfunding,” the regulator said.
“The complexity of these products means that consumers may find it difficult to assess the risks involved in investing in them.
“This means they frequently overestimate potential returns and underestimate the potential for capital loss.”
It highlighted “inappropriate sales tactics such as the use of headline grabbing return figures or mis-categorisation of retail investors as professional investors.
The FCA also warned that the current economic environment and low yields have heightened interest in higher-risk products such as P2P lending and increased the chance that consumers might invest inappropriately.
“This analysis will feed into our business plan 2019/20,” the FCA said.
“The FCA needs a view of how the financial system is working as a whole to inform the decisions we make relating to consumers, market integrity, and competition.
“Once a year we bring our collective intelligence and analysis together into documents called sector views.
“These give us a picture – an FCA view – of how each financial sector is performing.”
The regulator added that this was not a consultation document but it welcomed views on the information.