The 2019 ISA season is now in full swing, and it's as good a time as any to focus on financial planning - and, within that, looking ahead to your retirement years to ensure financial security.
FCA regulation of the peer-to-peer lending industry
The peer-to-peer lending (P2P) industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed primarily to achieve the following key objectives.
- Provide additional protection for consumers
- Promote effective competition within the P2P lending industry
- Allow the growth of the industry to continue in a controlled way
- Ensure platforms provide clear and not misleading information and have appropriate procedures for handling client money
- Ensure firms deal appropriately with customers in financial difficulties and complaints
- Ensure platforms maintain a stable financial position and have contingency arrangements in place in the event of a platform failure
What does this mean for Lending Works customers?
The FCA regulation is a very positive step forward for consumers. There is a strong emphasis on the transparency and availability of information on platform providers’ websites, particularly relating to the risks and rewards involved in P2P lending. This should make it easier for both lenders and borrowers to make informed financial decisions.
Borrowers will also be given a mandatory 14-day ‘right to withdraw’ during which they can cancel their loan agreement without penalty. This should encourage more borrowers to consider choosing P2P for their loans as opposed to traditional financial institutions such as banks.
The FCA has also included a number of minimum standards to which all P2P platform providers must operate. These include minimum capital requirements for the company operating the platform, relative to the size of its loan book. This should give consumers more confidence that the platforms through which they lend and borrow today will still be around tomorrow. Firms will also be required to make contingency arrangements to ensure that loan books would be managed to maturity in the unlikely event of a platform failure.
All of this means that our customers should have greater confidence in lending and borrowing through our site.
What does this mean for Lending Works?
Lending Works is fully supportive of the regulation as we believe it is essential for the credibility and reputation of the industry. The company was designed and built with the upcoming FCA regulation in mind, and therefore the impact on the company will be less significant than might be expected.
That said, there will of course be regular compliance reporting requirements and further investment in process and technology. However, we strongly believe that the regulation of the sector should only benefit our customers and so we will not be passing any of our additional costs onto customers through increased fees.
What does this mean for the P2P lending industry?
We strongly believe that the FCA regulation is fantastic for the industry as a whole. The increased consumer awareness of this sector and additional credibility and consumer protection should give lenders more confidence in how their money is being managed and borrowers more confidence in choosing P2P platforms as their loan provider.
Investment advisers will also welcome the sector being regulated as they can now advise and recommend to their clients what is a highly attractive product alongside other investment opportunities.
This regulatory environment should also ensure that the exponential growth experienced by the industry over recent years can continue in a controlled manner whilst maintaining the high standards and customer focus with which the industry is associated.
Above all, we hope that the FCA regulation will cement peer-to-peer lending as a mainstream financial service.
The Lifetime ISA (LISA), announced in 2016, would prove to be one of George Osborne’s last flagship gestures to UK savers and investors as Chancellor, eventually launching against a backdrop of anti-climax a year later in April 2017.
There is barely a week to go until the conclusion of the 2017/18 financial year, which means that, as ISA season begins to hot up, time is running out to take advantage of your ISA allowance.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.