From 1st April 2014 Funding Circle and all other P2P lending platforms have been subject to Financial Conduct Authority (FCA) regulation – under ‘loan-based crowdfunding’. This is a positive step that will help us maintain high standards in the industry.
The regulation will impact investors in the following areas:
- Peer-to-peer lending platforms are required to have arrangements in place to be able to return available funds and administer existing loans in the event that the platform fails. This means that if a platform fails, all of your existing loans will be unaffected. You will continue to receive repayments and any available funds will be returned to you. This is something we have had in place since we first started.
- All P2P lending platforms are required to hold capital reserves (extra cash) to help reduce any business and financial risks. Again, this is something we have always done.
- Every platform must have a complaints procedure in place - (you’ll find ours here in the FAQs). If necessary, investors will be able to take their complaints to the Financial Ombudsman Service.
The FCA has also issued guidelines on the information that a P2P platform should provide to investors, most of which we already provide you with. These include:
- Information on the average returns (after fees and bad debt) from the last few years
- Expected bad debt rates going forward
- If the loans are secured, and if so, what form the security takes
- An explanation of the criteria that the borrower must meet to be eligible for a loan (e.g. at least £50K turnover)