The City watchdog is to launch a crackdown on peer-to-peer (P2P) lending in a move designed to protect investors from platforms that do not provide sufficient financial information to investors.
The Financial Conduct Authority (FCA) is understood to be considering much tougher curbs in a long-delayed review of the crowdfunding industry in the early autumn. It is understood to be ready to demand that platforms such as Funding Circle and Ratesetter provide more detailed information on the past performance of loans. P2P lenders may also have to be clearer about how much due diligence is carried out on companies looking to borrow money on their sites.
P2P has grown rapidly over the past decade as businesses seek alternative forms of finance. The services, which pool investors’ cash and lend to businesses and consumers, have been accused of masking the true performance of the loans. Some have reduced lending rates, leading a number of investors to question whether they are being properly rewarded for the risks they take.
It is understood the FCA has singled out the industry for scrutiny, raising concerns that a valuable source of finance for start-up businesses could be stifled.
“Where there is a gap with investor expectations and platform services, the FCA is likely to be more prescriptive,” said a source close to the watchdog.
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FCA officials believe that some platforms do not provide enough information for people to compare returns on crowdfunding and P2P loans with other types of investment.
Last year the former financial regulator Lord (Adair) Turner said that the “losses which will emerge from peer-to-peer lending over the next five years will make the worst bankers look like lending geniuses”. However, the industry has proved its worth to small businesses that have struggled to find funding through conventional channels.
FCA chief executive Andrew Bailey said: “Our focus is ensuring that investor protections are appropriate for the risks in the crowdfunding sector, while continuing to promote effective competition in the interests of consumers.”
PPI firm loses court battle
A company that profits from payment protection insurance (PPI) complaints has lost a High Court battle over a deadline for filing new “mis-selling” claims.
We Fight Any Claim called for a court hearing over the City watchdog’s decision to impose a cut-off date for new complaints of August 2019.
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The PPI claims firm argued that millions of customers would be denied access to compensation and that the Financial Conduct Authority (FCA) was being “remarkably unfair” to the consumers it has a duty to protect.
On Friday, a judge told the company the review would not be taken forward. We Fight Any Claim has seven days to launch an appeal.
The FCA said: “We are extremely pleased that the court has refused permission to bring judicial review proceedings. Introducing a deadline on PPI complaints is the right thing for consumers.”
