Thursday, November 07, 2024
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No peer to peer applications rejected by the FCA but majority are withdrawn

A recently published freedom of information response has revealed that since the FCA took on regulatory responsibility for peer to peer (P2P) lenders in 2014, no applications for authorisation have been rejected outright, but over 80 per cent of applications have been withdrawn.

The figures show that up to 13 June 2018, 373 applications for authorisation were submitted to the FCA by P2P firms, 310 of which were withdrawn, while no applications were rejected.

More recent information obtained by audit, tax and consulting firm RSM reveals that as at 26 July 2018 there were 65 FCA-authorised P2P lenders and 2 P2P lenders with interim permission.

The numbers appear to reflect the historically supportive approach taken by the FCA to assist firms to secure the permissions, while not rejecting applications outright. However, the fact that 310 applications were withdrawn by applicants suggests that the FCA has adopted a measured approach to some applications and in line with the famous Flower of Scotland ballad ‘has sent them homeward to think again’.

The new statistics have come to light following the FCA’s recently announced consultation on peer to peer lending. Many of the themes reflect the maturing of the sector, becoming less alternative and more mainstream.

Commenting on recent developments, Damian Webb, RSM restructuring partner and a specialist in alternative finance said:

‘These new figures help to shine some light on the FCA’s approach to regulation to date, which has arguably been fairly light touch.

‘Initially, the FCA anticipated that the standards of the wider UK financial sector would translate into consistent and transparent standards being applied in the P2P space. However, the FCA probably didn’t appreciate the extent to which so many of the key players were “alternative” to the established financial sector with many of them being young, entrepreneurial and coming from a tech rather than financial background.

‘This has led to many of the practices and behaviours of the peer to peer sector being inconsistent and sometimes at odds with best practice.

‘The recent consultation seeks to address this inconsistent behaviour and ensure best practice is followed. This has to be commended, and it is particularly timely given that the historically benign credit conditions appear to be changing.

‘With a stricter regulatory environment coupled with tougher credit conditions, it will only be a matter of time before some P2P lenders are censured for their failure to adopt the best practice that has served the UK’s financial community for decades.’

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