22 February 2018
Matt White

Matt White

Matt White - Finextra

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A post relating to this item from Finextra:

Financial start-ups form lobby group

21 October 2009  |  9346 views  |  0
A group of US financial services start-ups that use technology-based models to target customers disillusioned with traditional banks, has formed a lobby group calling for regulatory reform that promot...

Zopa calls for change in tax laws

21 October 2009  |  5110 views  |  1

So, through this lobby group, Prosper and Loanio are trying to pitch themselves as fresh-faced, clean alternatives to the big bad banks that have got us into a bit of a mess. These paragons of virtue now want the government to help them help ordinary folks get a loan.

I'm a fan of the model but these companies should have checked the rules a bit more carefully before they started facilitating loans. It's their own fault they got shut down, hit with fines and now face (Prosper at least) law suits.

Interestingly, UK-based Zopa spotted the problem and attempted a different model in the US, working with credit unions. Tough market conditions meant it quit the market but things appear to be going pretty well back in Blighty.

And now it's attempting a bit of lobbying itself, asking Westminster for a change in the tax laws.

Weighing in on a blog by BBC economics editor Stephanie Flanders about BofE governor Mervyn King's controversial speech today, Zopa CEO Giles Andrews says: "Our lenders are currently disadvantaged in that unlike banks they can't offset bad debts against their income from lending at Zopa. This doesn't seem remotely reasonable and certainly doesn't do anything to promote the growing P2P lending sector which offers a real alternative to the banks (for personal lending) without the pitfalls highlighted so clearly in Mervyn King's speech, and all without any taxpayer support."

The firm claims it has cross-party support for a tax change, even posting a blog on its site bragging about MP fans - a dangerous group to align with at present.

Zopa loves to portray itself as the plucky underdog and has managed to garner an awful lot of good publicity considering the tiny impact it has so far made on the lending market.

We just want a level playing field with those big bad banks is the cry, as Giles asks people to e-mail the chancellor about its "tax campaign".

Personally, I'd back the call - anything to promote competition - but here's an alternative view from equitableinterest on the BBC blog worth noting, if only because it's startling these days to see someone who still thinks banks are a force for social good.

"@ zopagiles Do your lenders have the same business risks as banks? e.g. do they employ thousands of people, over hundreds of branches, using local services, creasting wealth for people other than themselves? If not why should the general taxpayer subsidice their extra risk for what is undoubtedly an extra return?"

TagsRetail banking

Comments: (1)

Giles Andrews
Giles Andrews - Zopa - London | 23 October, 2009, 18:00

Thanks for the mention. Not really sure what the poster you quote was talking about. Indeed there were 2 responses to him on the BBC, firstly:

102. At 12:34pm on 21 Oct 2009, armagediontimes wrote:

#93 equitableinterest. The question is not why should the general taxpayer subsidise Zopa lenders but why Zopa lenders should subsidise the general taxpayer - i.e. You. But you don´t get it do you?

If you think banks creqate wealth for people then Oh boy are you going to be surprised. Reality is heading your way, and it weighs 1500 tonnes.

and then:

103. At 12:49pm on 21 Oct 2009, Reaper_of_Souls wrote:

# 93. At 11:49am on 21 Oct 2009, equitableinterest wrote:

"@ zopagiles

Do your lenders have the same business risks as banks? e.g. do they employ thousands of people, over hundreds of branches, using local services, creasting wealth for people other than themselves?"

The banks we bailed out actually seemed to be doing less and less of that over the years.
..and even after those costs they made massive profits - although of course we got some of that back in the form of tax (although banks are pretty good at reducing the tax they pay) and through pension scheme shareholdings.

You seem keen to portray the banks as a social service, when they're a business, others may profit from their presence, but they provide services to the bank for that.
The excuse that what may be seen as a less efficient way of doing something is better because it pays more to others due to that inefficiency is akin to the argument for throwing more and more at the public sector and getting nothing more for it.
If at the end of the day there's no additional gain, surely resources could be put towards doing something more useful.

In many ways, the inflated interest margins exploit borrowers (other than those with loans tied to base rate) and especially savers to fund the cost base and create those nice profits [although most are from merchant banking] and go towards paying bonuses.

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