The Financial Conduct Authority (FCA) has hailed its work on ensuring forbearance for borrowers during the coronavirus crisis and combating scams in its latest annual report, but there is no mention of peer-to-peer lending.
The regulator’s annual report covers the 12 month period to the end of March 2020, during which there has been work that affects P2P lending platforms such as extending the senior managers and certification regime and preparing for Brexit.
But here are some more specific P2P issues that didn’t make it into the 173-page annual report.
The FCA oversaw the introduction of new marketing restrictions and appropriateness tests that went live on 9 December 2019.
The aim was to ensure retail investors understand the risks of where their money is going.
Firms must also have wind-down plans in place.
This can be seen as a highlight, with all platforms complying.
It has helped create some clean exits from retail P2P with Landbay and ThinCats shifting to institutional funding and MoneyThing announcing plans to close.
Sadly, the rest of the FCA’s P2P activity is less positive.
The FCA faced questions last year regarding its oversight of Lendy prior to the P2P property lender’s collapse in May 2019.
Administrators for Lendy have revealed that the FCA gave full authorisation to the platform In July 2018 at the same time that it had raised concerns about its loans and ordered a remediation scheme.
Andrew Bailey, then chief executive of the FCA, argued that regulating Lendy provided more consumer protection but this decision was cited as one reason for scrutinising his subsequent appointment as Bank of England governor.
The regulator seems to have a bee in its bonnet about the risks of the sector, often comparing it to unregulated products.
The FCA issued advice on avoiding Covid-19 scams in March, which include a warning on ‘non-standard investments’ that links to another FCA webpage warning consumers of high-return investments.
Here it lists P2P lending alongside other investments such as unregulated collective investment schemes and land banking.
In April last year, P2P platforms hit back at a warning from the FCA to consumers about the Innovative Finance ISA (IFISA) at the height of ISA season.
This can also be seen in its approach to mini-bonds.
The FCA is planning to make a ban on the marketing of mini bonds to retail investors permanent but has also extended the proposal to include speculative illiquid securities, which could hit crowd bond providers.
There are hopes that crowdfunding platforms will be exempt from the ban as they are regulated, unlike mini-bond providers.
Hopefully next year’s annual report has more regulatory highlights for the sector.