HNW Lending has been issued with a regulatory restriction which means it cannot accept new retail money.
The Financial Conduct Authority (FCA) has said that the peer-to-peer lender, which lets borrowers apply for loans from £30,000 to £3m secured on assets such as property, cars and fine wine, cannot promote or accept any new applications for lending by retail investors.
It has also been told to limit any secondary market activity for retail investors but to continue repayment of capital and interest.
The platform must also review and implement a risk management framework to meet FCA handbook requirements, the restriction said.
Ben Shaw, chief executive of HNW Lending, told Peer2Peer Finance News that he was unable to comment on the reasons for the restriction but said the platform is not in wind-down and is still open to non-retail investors.
P2P analysis firm 4th Way has suggested the FCA is unfamiliar with HNW Lending’s style of P2P lending, which it said relies on the value of the asset, doesn’t categorise loans by the likelihood of them going into default and doesn’t have a large number of historical loans to base forecasts on.
Shaw told 4th Way that only a small proportion of loans have lost money and predicted most would be recovered.
“Further to feedback from the FCA and concerns we have in relation to Covid-19 and its impact on the lending market as well as a lack of appropriate lending opportunities, we have temporarily suspended sales of loan participations to retail investors,” he said.
“We will write to you once this suspension has been lifted and we apologise for the inconvenience that this may cause you.”
Read more: HNW Lending ready to resume new loans
Neil Faulkner, founder of 4th Way, said the FCA may see similarities between HNW Lending, which relies on the high values of an underlying security, and the collapses of Lendy and Funding Secure which took similar approaches.
However, Faulkner added that the difference is that HNW Lending has been good at recovering debts.
The platform’s directors also take a first loss on the loans.
Faulkner predicted the issue would be resolved this month.
“It’s highly notable that this is not a compulsory suspension ordered by the FCA,” Faulkner said.
“The FCA hasn’t publicised this in an announcement for the press to pick up on, which is standard procedure when a company commits grievous errors and faces serious action.
“The FCA is asking HNW Lending to make some changes – it’s not shutting it down.
“My overall opinion is that the FCA is being cautious about a type of lending that it’s unfamiliar with, because it’s not usually regulated.”