Peer-to-peer lenders may have to wait until the end of the year to find out if they will be included in a regulatory clampdown on financial promotions.
The City watchdog published a three-year strategy last month to enhance consumer protections, particularly for what it views as high-risk investments including P2P lending.
The Financial Conduct Authority’s (FCA) analysis said six per cent of adults invested in high-risk products during the pandemic, while 45 per cent of self-directed investors said they did not realise the risks.
The regulator said it is aiming for a 50 per cent reduction in the number of consumers putting money into high-risk investments who indicate a low risk tolerance or demonstrate the characteristics of vulnerability, by 2025.
Mike Carter, head of platform lending at trade body the 36H Group, said the sector will await publication of a promised discussion paper on these issues in the fourth quarter of this year to see what is being proposed.
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But Stuart Law, chief executive of Assetz Capital, is hopeful that P2P lending won’t be hit with drastic changes.
“P2P lending is not in the same space as most of the other ‘high-risk’ investments the FCA lists and is heavily regulated already,” he said.
“Whilst other sectors may be badly hit by these proposed changes, and correctly so, we trust that well-run and compliant P2P companies will be allowed to continue as before, benefitting investors with good levels of return versus the managed risks and without any material reduction in investor numbers.”
Brian Bartaby, chief executive of Proplend, also urged the FCA not to lump P2P lending in with unregulated products such as cryptocurrencies and contracts for difference.
“Conceptually we have no issues with the FCA strengthening firms’ financial promotions approval requirements to ensure that investors fully understand all risks,” he said.
“But we struggle to understand their sweeping statement around halving the number of consumers investing in high-risk investments by 2025.”