You may have seen that the Financial Conduct Authority (FCA) has recently announced new regulations for the peer-to-peer (P2P) lending industry. Below we outline what this means for you as investors and what changes will come in for P2P lending platforms more broadly.
What are the new regulations?
The FCA began regulating the P2P lending industry in 2014 and announced at the time that they would open a ‘post-implementation’ review in 2016 to assess how the regulations were working alongside innovation in the sector. At Funding Circle we’ve always welcomed regulation and worked with the FCA to raise standards across the sector.
The new regulations include new rules around what information platforms must provide to investors. We have always believed in transparency, and in helping our investors make the right decisions, and believe these rules will help to raise standards across the industry and make sure all platforms provide important information to investors.
The new regulations also introduce more robust requirements around governance and risk management, and many of the new regulations have replicated our approach to risk management and made it policy for the wider sector.
How will it affect you?
As an existing investor, you don’t need to take any action and can continue to lend to businesses as normal through your account.
More broadly, investors can expect to see more information from P2P lending platforms, helping them to make better informed decisions about which investment products are right for them.
Extra steps for new investors
After the regulations come into force on 9th of December 2019, new investors at P2P lending platforms will need to take an ‘appropriateness’ or understanding test. The FCA believes this will help to ensure customers understand how the platform that they are signing up to works, the risks involved in investing on that platform, and the nature of the investment the platform offers.
For investors who are not classed as ‘sophisticated’ or ‘high net worth’, there will also be limits on how much they can lend in their first year investing through P2P platforms. After this point, when the FCA believes investors will have a good level of understanding of how P2P lending works, investors will be able to increase their lending beyond that limit.
What happens next?
As mentioned above, you don’t need to take any action. We will be introducing the new steps outlined above over the coming months. We are also reviewing the policy statement in detail to understand whether we need to make any further changes before the 9th of December deadline to adhere to the new regulations. Should any further changes be needed, we’ll let you know in advance what they’ll be and how they will affect you.