EasyMoney CEO calls for change to FCA risk warnings
EasyMoney’s chief executive has called on the Financial Conduct Authority (FCA) to update its risk warnings to better represent the reality of peer-to-peer lending.
Jason Ferrando said that the FCA’s one-size fits all approach to risk is an “odd” approach that is likely to disadvantage some participants in the sector.
“It seems somewhat unjust to corral diverse and risky investment businesses into one ‘pot’ regardless of the fact that some of us have, in effect, low risk to our investors and others have significant risk,” said Ferrando.
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“I wholeheartedly support ensuring investor risk is mitigated and that all such transactions are entered into in an eyes-wide-open way.
“But for the sake of both fairness and clarity, I feel a warning stating investors could lose all of their money would mean property values would have to drop to zero and stay at a zero value for some time, is an unfair approach to public disclaimers and to bundling pay-day-lenders and unsecured loan shops together with other businesses that have funds secured against UK property.
“It just doesn’t seem equitable”.
EasyMoney pointed out that the FCA treats a myriad of financial services businesses as one and the same but requires all businesses to use the same wording in ads, websites and documentation.
“For instance a platform that raises capital as an unsecured pay-day loan operator is seen as the same risk as a company that invites investment secured by a first charge on property,” the platform said. “Clearly the two risks are entirely different.”
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As a property-backed P2P lending platform which has a maximum loan-to-value of 75 per cent, Ferrando said that it represents a much lower risk than unsecured lending firms.
“There are no examples in the last 50 years in which UK property prices have ever fallen by as much as 25 per cent let alone more,” he added.
According to data from Savills and Nationwide, during the prolonged recession of the late 1980s and early 1990s; and during the 2008 financial crisis, house prices fell by just 19 per cent.
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