The regulator proposes a consultation on loan providers for borrowers not operating ‘by way of business.’
The consumer and market research should be completed early in 2017 with a consultation on rule changes out by mid-2017 and final rules in 2018.
The regulator is concerned by a number of largely investor-side issues, including misleading financial promotions and risk profiling of the loans as investments and the impossibility of comparing crowdfunding with other asset classes.
However, on the loan-based side, the regulator is also worried investors may not fully understand the risks involved in investing in these loans. If a P2P loan provider folds, the regulator is also concerned about the flimsiness of the loan book run-off plans of some of these firms and challenged some to improve client money handling standards.
The FCA’s current rules on loan-based and investment-based crowdfunding platforms came into force on 1 April 2014. The regulator is proposing to strengthen these rules to provide ‘adequate protection’ for consumers but still allow for innovation and growth, it said.
Andrew Bailey, chief executive of the FCA, said: “Based on our findings to date, we believe it is necessary to strengthen investor protection in a number of areas. We plan to consult next year on new rules to address the issues we have identified.”