P2Ps optimistic as latest FCA consultation comes to a close
The City regulator’s consultation on strengthening the promotion rules for peer-to-peer lending closes today, amid tentative optimism among the P2P community.
In January, the Financial Conduct Authority (FCA) published its consultation on strengthening financial promotions for high-risk investments, including P2P lending.
The regulator said it was planning to ban the promotion of investor incentives, such as new joiner or refer-a-friend bonuses. It also said it will improve the risk warnings on ads and has outlined plans to strengthen appropriateness tests, for example by removing the ease of retakes.
Feedback to the consultation closes today (23 March) and the FCA plans to confirm its final rules this summer.
Read more: P2P sector reacts to new FCA proposals
P2P lending platforms and stakeholders have welcomed the FCA listening to industry feedback, citing UK Crowdfunding Association (UKCFA) research that showed that investors have a good understanding of the sector, and shelving a proposed marketing ban on P2P development loans for now.
However, the sector still has some concerns of being labelled as high-risk and lumped in with cryptocurrency, while some industry stakeholders have worried that the FCA is missing the point of some financial promotions.
Neil Faulkner, managing director of P2P ratings and research firm 4th Way, said he cannot predict the FCA’s actions but hopes it pulls back from the most aggressive regulatory ideas.
Read more: FCA blocks a quarter of firms from consumer investments market
“It’s always difficult to tell what the FCA will do,” he said.
“They can often produce well-considered, balanced regulation, but their own interests also mean that they can be too risk-averse, so that they avoid all possible blame if something goes wrong.
“Also, they still either don’t understand P2P lending or they consider illiquidity to be a greater risk in investing than the risk of capital loss, which is the wrong way round. Otherwise, they wouldn’t throw P2P lending into the “high-risk investments” category.
“The FCA has often pulled back from the most aggressive regulatory ideas after consultations and roundtables so far. I hope that it does so again this time.”
Read more: Government backs crowdfunding sector with plans to cut to the red tape
