Peer-to-peer lending platforms have welcomed the regulator’s guidance on vulnerability and said platforms need to ‘wake up’ in order to protect lenders and borrowers.
The Financial Conduct Authority (FCA) said that firms should do more to ensure that vulnerable consumers are helped. The City watchdog has issued guidance on allowing all of its regulated firms to accurately assess whether they are treating vulnerable consumers fairly. This is open to consultation until 30 September.
Stuart Law, chief executive of Assetz Capital, said the consultation is ensuring the current rules are fit for purpose and taken seriously. He added that during conversations with other platforms, he can’t recall vulnerability being mentioned.
“Based on this consultation I think platforms ought to be very awake to vulnerability and if they don’t already have policies in place, they need to think about formulating them,” he said.
“All financial institutions should have guidelines for vulnerable customers. There can certainly be challenges and financial services have greater levels of responsibility to look after and protect people.
“People shouldn’t complain about more red tape because this is a very important part of supplying finance. It takes up countless amounts of time and resources and smaller lenders need to take on board guidance and employ the resources they need for vulnerability processes.”
Law added that his customer-facing is efficient, experienced and trained to identify and deal with vulnerability. He said they need to be able to deal with all cases, including those that are extreme, including instances where there are concerns around a person’s safety and mental health.
“That’s one of the more vivid extreme real-world examples of what could happen, but it does occur in financial services and businesses need to be prepared for that,” he said.
“It’s deadly serious and the person answering the phone needs to know what to do because someone’s life depends on it. This has happened to our staff in their careers, it’s relatively common.
“There are plenty of other situations like if an investor passes the appropriateness test but over time gets to a position where they don’t know what they’re doing and shouldn’t be investing.”
Mike Bristow, chief executive of CrowdProperty, said that the regulator’s job is to protect the everyday person, and it did so with December’s regulation, enforcing a 10 per cent limit on how much investors can invest in P2P, and requiring platforms to introduce appropriateness tests.
“The principle behind the regulation is protecting the everyday person,” he said.
Christopher Woolard, interim chief executive at the FCA, said that the rules have been introduced as more customers will be struggling with their finances as a result of the impact of Covid-19.
“Supporting vulnerable consumers is a key focus for the FCA, and the coronavirus crisis has only highlighted its importance,” he said.
“While many firms do excellent work to support their vulnerable customers, we will not hesitate to step in where others do not.”
Eric Leenders, managing director of personal finance at UK Finance, also welcomed the regulator’s guidance.
“This draft guidance will provide a practical framework to help identify vulnerable customers and ensure they receive the best possible support,” he said.