26 September 2016
Find out more

FCA sets out P2P lending and crowdfunding rules

06 March 2014  |  5661 views  |  0 Silouhette business meeting

The UK's Financial Conduct Authority (FCA) has set out rules designed to boost protections for people lending and investing through P2P and crowdfunding platforms.

P2P lending (dubbed loan-based crowdfunding by the FCA) has seen its popularity soar over the last year, with £480 million lent to consumers and business through platforms such as Zopa and Funding Circle in 2013.

With the FCA taking on regulatory oversight of the practice from April, it has now, following consultation, set out rules designed to ensure that potential lenders have access to clear information on the risks that they are taking on and on who is ultimately borrowing their money.

The rules also require P2P platforms to put in place plans to make sure that loan repayments can still be made even if they get into difficulties. New prudential regulations will be introduced "over time" so that these firms have capital to help withstand financial shocks, an important feature because lenders will not be able to claim through the Financial Services Compensation Scheme.

The UK security-based crowdfunding market is far smaller than P2P, raising just £28 million last year but this represented a 600% rise on 2012 and the government is keen to promote takeup as an alternative to traditional high street lending.

To protect amateurs, normal investors will only be able to put up to 10% of their assets into crowdfunding projects. Those who take advice or are experienced investors can put in more.

Christopher Woolard, director of policy, risk and research, FCA, says: "We want to ensure that consumers are appropriately protected - but not prevented from investing. We have been careful to listen to feedback from the market and the rules provide consumer protection, whilst allowing businesses to continue to have access to this innovative method of funding."

With many small firms still struggling to get financing from traditional sources, the government is keen to promote crowdfunding and P2P lending as viable alternatives.

However, Barry James, founder of The Crowdfunding Centre, slammed the rules, particularly the 10% provision: "On a day like today one has to wonder whether our FCA is the worst regulator in the western world. The words that spring first to mind are inflexible, stubborn and unimaginative. Maybe it's time for a change." 

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Barclays Africa buys stake in South African P2P lender RainFin

Barclays Africa buys stake in South African P2P lender RainFin

05 March 2014  |  6393 views  |  0 comments | 4 tweets | 5 linkedin
UK crowdfunding market raises £1700 an hour

UK crowdfunding market raises £1700 an hour

05 March 2014  |  3828 views  |  0 comments | 11 tweets | 8 linkedin
New Zealand gives green light to crowdfunding

New Zealand gives green light to crowdfunding

27 February 2014  |  4452 views  |  0 comments | 5 tweets | 9 linkedin
P2P lending shows big upswing in 2013

P2P lending shows big upswing in 2013

03 February 2014  |  5756 views  |  0 comments | 12 tweets | 8 linkedin
Crowdfunding in the UK set to raise £1.6 billion in 2014

Crowdfunding in the UK set to raise £1.6 billion in 2014

13 December 2013  |  5429 views  |  0 comments | 10 tweets | 9 linkedin
UK govt to allow P2P returns within Isas - Telegraph

UK govt to allow P2P returns within Isas - Telegraph

03 December 2013  |  3459 views  |  0 comments | 6 tweets | 1 linkedin
SEC proposes new crowdfunding rules; FCA begins consultation

SEC proposes new crowdfunding rules; FCA begins consultation

24 October 2013  |  4658 views  |  0 comments | 4 tweets | 3 linkedin
EC explores crowdfunding action

EC explores crowdfunding action

03 October 2013  |  5936 views  |  0 comments | 5 tweets | 3 linkedin

Related company news

 

Related blogs

Create a blog about this story (membership required)
Find out moreVisit colt.netFind out more

Top topics

Most viewed Most shared
RBS tests demonstrate ability of Ethereum to support a national domestic payments systemRBS tests demonstrate ability of Ethereum...
12003 views comments | 48 tweets | 33 linkedin
Banks test blockchain for reference data managementBanks test blockchain for reference data m...
8375 views comments | 16 tweets | 25 linkedin
Swift beware: Ripple signs banks to global payments steering groupSwift beware: Ripple signs banks to global...
7143 views comments | 31 tweets | 14 linkedin
Deutsche Bank teams up with accelerator to back fintech startupsDeutsche Bank teams up with accelerator to...
7080 views comments | 12 tweets | 5 linkedin
BNP Paribas extends crowdfunding blockchain programmeBNP Paribas extends crowdfunding blockchai...
6918 views comments | 15 tweets | 15 linkedin

Featured job

Find your next job