The Financial Conduct Authority (FCA) has risked the ire of the peer-to-peer lending sector yet again by naming the asset class among high-risk investments, as it outlines how it combated consumer harm last year.
The City watchdog has previously angered P2P executives by warning about “high risk Innovative Finance ISAs” and a report summarising its work on tackling consumer harm today (18 January) lists the regulated asset as higher risk alongside unregulated cryptocurrencies and mini-bonds.
It said it stopped applications for authorisation from 343 financial services firms and individuals, where the potential for consumer harm was identified last year.
The regulator said it opened more than 1,500 supervisory cases involving scams or higher risk investments and received more than 24,000 reports of unauthorised activity and published over 1,000 consumer alerts – an 82 per cent increase on the previous year.
It is unclear how many of these, if any, were in the P2P lending sector.
The report lists investigations and fines completed last year, none of which involved P2P lending.
It also shows the most complained about products during the first half of 2020,
There were 131,458 complaints opened about investment products during that period, the FCA figures show, and 5,511 were about P2P lending.
This was below the numbers for ISAs and pensions.
P2P lending does, however, rank high among complaints on a per 1,000 products basis at 21, which is second behind forex and spreadbetting at 31.
“The UK has one of the world’s leading financial services industries, offering consumers access to a wide range of investment products,” Sheldon Mills, executive director for consumers and competition at the FCA, said.
“In some areas however, the consumer investment market is not working as well as it should and too often consumers are offered unsuitable products or advice.
“Protecting consumers and ensuring they have confidence in the suitability of advice they receive is a key priority for the FCA and today’s report highlights some of the work we are undertaking to achieve this.”
The City watchdog is also calling on firms to review their regulatory permissions to ensure they reflect their current business models.
“Incorrect or out of date permissions increase the risk of harm to consumers as they can mislead consumers about the level of protection offered or give credibility to unregulated activities,” Mills added.
“We will take action where we consider out of date permissions may cause harm to consumers. The message is clear, use it or lose it.”