Former City minister Lord Myners may not be a big figure in peer-to-peer lending but he did spend more than a year scrutinising the sector.
The crossbench peer, who passed away on Sunday 16 January age 73, submitted parliamentary questions about P2P lending-related issues 20 times between 2019 and 2020.
His queries covered issues such as the collapses of Lendy, FundingSecure and Collateral as well as P2P secondary markets and how exposed the British Business Bank (BBB) was to P2P lending.
Here are the key themes he raised questions about.
Lord Myners called for an independent review into the Financial Conduct Authority’s (FCA) supervision of Lendy after it collapsed in May 2019.
He urged the Treasury to review how the City watchdog handled the Lendy collapse, after the regulator revealed it had put restrictions on the platform’s activity.
He submitted a parliamentary question that asked the government to “establish an independent review into the FCA’s supervision of Lendy and the actions taken by the FCA once it had raised questions about the firm’s compliance with minimum regulatory standards and disclosure to lenders.”
A response from Lord Young on behalf of the government appeared to reject the move.
“There is an ongoing FCA investigation into the circumstances that have led to the administration of Lendy,” he said.
“It is important that the FCA rules for P2P lending remain relevant for this evolving sector, and the new rules announced by the FCA on 4 June reflect this.
“These will help to ensure that investors have the information they need to make effective decisions about P2P investments, without imposing additional costs on borrowers.”
The FCA also wrote to Lord Myners in July 2019 and explained that it gave Lendy full authorisation in July 2018 to protect investor money while a remediation exercise was carried out at the platform.
The P2P pawnbroking lender collapsed in February 2018 and Lord Myners started raising questions about the FCA’s supervision of the platform in July 2019, asking seven questions about the role of the regulator.
He questioned whether there were similarities between the collapse of Collateral, Lendy and London Capital & Finance that supported the case for a change in regulation. He also asked when the FCA first became aware that Collateral was operating without the correct authorisation.
He also asked both the government and the regulator why Collateral was still allowed to take new client money when it was not authorised, how it was able to change its name on the FCA register during that time and whether any action was taken by the government.
The government’s response to all these queries was to direct Lord Myners to ask the FCA.
The peer turned his attention to secondary market sales on P2P lending platforms in October 2019.
He asked the government what steps they are taking to “investigate delays in and take action to speed activity in, and ensure lenders are properly informed about, secondary market sales in P2P lending.”
His question came just two months before new P2P regulations were set to be introduced by the FCA and the government responded by saying it is up to the City watchdog to set the rules.
Lord Myners was back on the government’s and the FCA’s case when FundingSecure collapsed in November 2019.
He asked what plans were in place to establish an independent inquiry into the failure of FundingSecure and on which date the FCA first became aware that the firm was experiencing difficulties.
The Earl of Courtown, deputy chief whip of the House of Lords, responded that there will be no government-led inquiry into the collapse of FundingSecure.
British Business Bank P2P loan exposure
Lord Myners tabled eight separate questions between late 2019 and early 2020 about how the BBB conducts due diligence on P2P platforms and loans that it invests in as well its exposure to defaults.
The government rejected calls to provide an aggregate figure of its exposure to defaulted P2P loans as it said this was “commercially sensitive.”
A spokesperson for the BBB told Peer2Peer Finance News at the time that rather than checking individual loans, the lender conducts “extensive due diligence on the platforms themselves.”
Anyone seeking funds from the BBB must go through a rigorous application process that details the investment structure and strategy as well as elements such as how funds are deployed, the returns and its track record.
It may also conduct background and referencing checks and interviews with current, previous and potential investors.