MORE firms withdrew rather than submitted applications to become authorised as peer-to-peer lenders in the run up to new regulations introduced today (9 December).
A Freedom of Information (FOI) request by consultancy Bovill found that between 13 June 2018 and 7 November 2019, 17 firms withdrew their application to be authorised for P2P permissions, compared with sixteen firms that applied.
Bovill’s research also finds that one firm had their application rejected in the period between 13 June 2018 and 7 November 2019. In the first four years since the FCA took over the regulation of the industry, not one firm’s application for P2P permissions was rejected.
A previous FOI request found that since the Financial Conduct Authority (FCA) began regulating the P2P industry in April 2014, 83 per cent of firms that submitted an application to be authorised as a P2P firm withdrew their application.
These findings come as the FCA introduces a raft of new marketing restrictions today, which include an ‘appropriateness test’ that mandates that platforms check investors’ knowledge and understanding of P2P investment, and a ‘restricted investor’ cap, which requires retail customers to pledge not to invest more than ten per cent of their portfolio in P2P loans.
“Increased uncertainty in the run up to the implementation of the new P2P rules has left some firms roiling,” Frank Brown, managing consultant at Bovill, said.
“But it’s not uncommon for a market to be shaken up by regulatory intervention. We expect the opacity to clear by early next year, when existing firms start transacting under the new rules. This should herald a more settled, robust P2P market.
“Although our findings show a reduction in volume of new market entrants, the P2P industry stands to gain from the new investor marketing rules. Firms with the right business model and sufficient resources can continue to offer an alternative source of funding to borrowers, whilst protecting investors.”