Peer To Peer Lending Firms Struggle To Meet Stringent Regulatory Requirements

The FCA (Financial Conduct Authority) took over the process of regulating the consumer credit industry from the OFT (Office of Fair Trading) in April last 2014. Since then, applications from peer to peer lenders who are seeking the seal of approval from the Financial Conduct Authority have been withdrawn.

According to the financial services regulatory consultancy Bovill, 30 out of 114 applications from new peer to peer lenders have been withdrawn. Seven of these 30 applications were full withdrawals, while 23 were partial withdrawals as firms removed peer to peer activities from their application but continued with other regulated business.

It is reported that these lending companies are having an issue regarding the rigorous regulatory requirements that FCA has laid down. Because of this, peer to peer lending companies are faced with financial issues as they process the said requirements in order to get approved.

The head of venture finance at Bovill, Gillian Roche-Saunderssaid:

“The high number of withdrawals suggests that the FCA is setting the bar high when it comes to full authorisation for P2P lenders – the process appears to be much tougher and more costly than many firms first anticipated.

P2P lenders have enjoyed a relatively light-touch approach from the regulator for some time. A rigorous authorisation process will have come as a shock to the system.”

A breakdown could be a threat to the peer to peer lending sector’s growing reputation, being a valuable alternative to the traditional lenders. For now, institutions are doubtful about whether P2P lending is a sustainable prototype that makes money as companies tend to boast about how much money is lent on their platforms rather than how much they earn.

Our business model is based around the property sector and therefore as property experts, this is not just our only activity though for the purpose of going for full application with the FCA, this may seem so and whether we declare money lent versus actual profit generated, this is not what we focus on and remember, all our deals are secured against property (normally as a first charge). It is a sustainable prototype for pour needs and that of all our investors.