Rebuildingsociety calls for FSCS competitor for P2P lenders

Rebuildingsociety has called for a competitor to the Financial Services Compensation Scheme (FSCS) which can be used by peer-to-peer lending platforms.

In a new blog post, the P2P business lender addressed concerns that small- and medium-sized enterprises (SMEs) are unable to access the financing that they need due to increasing regulation. The platform said that more could be done to ensure that safety of P2P funds, to encourage more investment in the SME lending sector.

“It would help if there was a competitor to the government guarantee scheme the FSCS,” Rebuildingsociety said.

“This expensive service protects consumers in the event of a bank failure. However, no such scheme exists for the protection of customers using P2P lending, where the industry has seen insolvency practitioners apply substantial fees for undertaking the wind down of a platform.

“The regulator’s work on wind down plans has improved things, but customers are still not protected from losses arising from a platform failure, in the same way as they are with banks.”

The rising use of personal guarantees (PGs) has been seen by some as an effort to offer some protection to investors in alternative lending platforms. However, this has proved unpopular among business owners.

Read more: FCA probes personal guarantees in small business lending

Earlier this year, the Federation of Small Businesses (FSB) launched a super-complaint against the Financial Conduct Authority (FCA) the prevalent use of PGs by lenders for SME loans. The FSB claimed that requests for PGs are dissuading business-owners from securing much-needed funding.

Rebuildingsociety.com has reached out to the FSB offering assistance with lobbying activity to the British Business Bank around access to alternative guarantee programmes, such as government guarantees.

Read more: Rebuildingsociety requests fair competition review by FCA

“In our view, part of the problem is that banks do not have the appetite for SME lending unless there is a government guarantee, because it’s not as profitable as other activities,” said Rebuildingsociety.

“The banks are global organisations which prefer to invest in faster-growing economies.

“We hope that future government guarantees are more accessible to SMEs who we believe should be able to access the scheme, agnostic of the lender.”

Read more: FSB hits back at FCA’s response to personal guarantee concerns