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The Assetz Capital platform is no longer open to investment from individual investors. No new investments into peer-to-peer loans are possible and, as a result, no new funds should be deposited. The existing loan book relating to the Retail platform is now in run-off and this will, over time, deliver the return of capital to investors. Full information can be found here . Existing Retail lenders can still log in, view information regarding their account and loan holdings and operate their account in accordance with the information regarding the run-off provided on the link above. Please see this important message regarding the currency of the information on the pages on this website.

A Guide to FCA Regulations for Peer-to-Peer Lending

What does the FCA do?

The FCA regulates companies that provide financial services to the public such as banks, insurance companies, and peer-to-peer lending platforms. It protects the public by setting rules which financial providers must follow.

It has a number of powers, including:

  • Laying down rules and minimum standards for financial providers.
  • Investigating organisations that it thinks may not be following these rules.
  • Banning products, firms and even individuals who fail to meet the required standards.

So in general, an industry which is regulated by the FCA should be safer for consumers than one that isn’t, because an independent body is looking out for their interests.

What are the Regulations for P2P Lending?

Before April 2014, peer-to-peer lending was not regulated by the FCA, and although most platforms did enforce rules and specific standards, they did so voluntarily.

However, now that the FCA is regulating the market, platforms are under scrutiny and must adhere to several new rules:

  • Peer-to-peer lenders are subject to the FCA’s Principles for Business, which provide an over-arching requirement to act with integrity, skill, care and diligence and to treat customers fairly.
  •  Typically, these Principles are underpinned by detailed rules or guidance, such as the rules requiring firms to arrange adequate protection for client monies.
  • All platforms must have plans in place to allow a third party to look after existing loans if a platform goes under
  • The platform must hold at least £20,000 as reserve capital

These Principles and rules are now strict requirements and firms that don’t follow them will face penalties.

What will the Regulations Impact?

The regulations will continue to allow the industry to flourish, yet in a controlled way. Consumers are more likely to have faith in an industry which is regulated as they can invest more safely and confidently knowing that platforms follow sensible guidelines.

What’s more, although the rules won’t necessarily stop platforms from going under, they should protect ordinary investors if this happens. For example:

  • In March this year, P2P platform YES-secure fell casualty to the expanding market and was forced into bankruptcy.
  • The company had been responsible enough to have backup in place, meaning that it had enough money to repay every single one of its lenders, who would otherwise have lost their investment.
  • What all this means is that technically, the market and its users are better protected from fraudsters and unreliable, risky platforms set up without safeguards in place as only those which are well-funded, stable and transparent should be able to operate in the industry.

All well and good in theory. However, even though these regulations should provide some protection to lenders, investors should continue to be vigilant and take sensible precautions when choosing to invest through a P2P platform.

What do you need to know?

Anyone new to P2P, or simply looking for another platform might wish to consider these four main characteristics before beginning to lend:

  1. The lending team: Is there any evidence that the team is reputable, knowledgeable and experienced?
  2. Track record: Does the platform have a trustworthy and transparent track record of past, present and future loans?
  3. Accessible information: Is the platform upfront with its presentation of information and is relevant and detailed information easy and quick to find?
  4. Happy customers: Can you find convincing evidence of the platform’s satisfied and loyal customers?

Reviews on forums such as Trust Pilot are a great way of gauging public opinion. Check out Assetz Capital’s reviews here.

Although FCA regulation means extra work for P2P platforms, it’s certainly a good thing for the industry. As platforms earn more and more trust from lenders, FCA regulation is a welcome stamp of approval.

 

- October 2, 2014

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