PLATFORMS should not wait for a loan to be in default before warning investors, the Financial Conduct Authority (FCA) has said.
The financial regulator has issued new rules, as part of its review of the P2P sector, that require firms to provide information on P2P loans that are likely to default.
From 9 December, the FCA handbook will define a P2P loan in default as when a borrower has exceeded the contractual payment due date by more than 90 days, or 180 days for property P2P loans.
“If a loan is likely to default, a platform should not wait 90 days or 180 days for property P2P loans before revaluing it and disclosing details of that loan in its ongoing disclosures to investors,” the FCA said.
“However, since there is an element of judgement in the determination of whether a loan is likely to default, we consider that changing the definition of default could make it difficult to compare the default ratios of different platforms.
“It could also create confusion in relation to other actions that flow from the definition of default. Instead, we have amended the rule that requires platforms to give investors information on defaults to require additional disclosure of P2P loans that are likely to default.
“Providing this disclosure alongside information on defaults will give investors a clear picture of likely additional defaults, which could lead to losses.”
The regulator adds that its rules do not prevent information being disclosed earlier if necessary.
A lack of transparency over defaults and loan management is one of the main complaints that P2P investors have had about certain platforms, including Lendy, which collapsed last month.