UK peer-to-peer lenders’ responses to the coronavirus crisis compared with their European counterparts show the benefits of regulation.
Withdrawal times have slowed on platforms such as RateSetter and Assetz Capital in recent weeks while platforms are also focusing on helping borrowers struggling to make repayments.
Some P2P lenders are even hoping to becoming accredited firms to facilitate the Coronavirus Business Interruption Loans.
These efforts are in sharp contrast to what is happening on the continent.
Both have blamed the state of emergency among European Union member states and how difficult it is to recover debts.
Investors are now stuck earning no interest and it is unclear if they can make withdrawals.
Both platforms had already said they were struggling to issue payments because of banking issues.
In the UK, the vast majority of P2P lenders are authorised by the Financial Conduct Authority and have to comply to regulations regarding solvency and wind-down plans.
Meanwhile, the European Parliament has been considering proposals for EU-wide crowdfunding regulations since March 2018 and a set of harmonised rules were finally agreed at the end of 2019.
But the European Crowdfunding Network has said there is still some fine tuning and these may not come into force until 2021.
The continental P2P lending sector has already had a warning shot about the lack of regulation amid the mysterious closures of Envestio and Kuetzal in Estonia, which are now being treated as frauds.
It seems that rules may need to be introduced sooner if more investors are to be protected so that platforms can’t just blame coronavirus for shutting down and shutting out investors.