Specialist Lending Solutions asked this week’s marketwatch panel for their views on the proposals and how the plans will affect the sector.
Damien Druce, director of Assetz Capital
As a business peer-to-peer (P2P) lender that works extensively in property, we can see that restricting retail investors’ access to peer-to-peer products could have a significant negative impact on the assistance that P2P lenders could provide housebuilding.
While overall government policy is to support SME house builders, these proposals will categorically reduce the funding available for those who rely heavily on alternative finance.
The peer-to-peer industry as a whole will have reduced access to retail cash making it necessary to raise more institutional funding.
While we could just replace retail funding with institutional money, most small platforms will struggle to do this in all likelihood and will be funding far less housing construction as a result.
It may even lead to some platforms closing. We believe that this change would impede the democratisation of finance.
On a positive note, while the proposals around credit risk and management may be challenging for smaller platforms to comply with, and some may close as a result, there will be a net benefit overall to the quality of credit offered by the platforms and investor confidence.
In a broad sense, and prior to our detailed response to the consultation, we welcome the proposed tightening of credit quality requirements within the sector.
Jo Breedon, MD of Crystal Specialist Finance
Regulation – as with the majority of the finance sector – can only be a positive step if considered and implemented correctly.
We do need to be careful though that it does not adversely affect customer choice and the flexibility on lending decisions that can lead to the many positive customer outcomes that we currently see.
As of today we have not utilised any straight peer-to-peer lending, but that does not mean we will not if it is the best possible solution for an individual application.
To do so we would need to be convinced about their own ability to make the right lending decisions and stick to them, because we have heard of agreements being made and then reneged upon.
Ultimately we are wary about working with lenders who are funded in certain ways, not just P2P, but we will use them if we are confident and have a relationship that ensures any agreement is seen through to its ultimate conclusion.
Relendex chief operating officer Max Lehrain
Peer-to-peer is now a prominent part of the lending landscape and the FCA proposals are a very good move to recognise this.
Those who have been involved in this sector for some time are used to regulatory change as it has grown, having moved from no regulations to the Office of Fair Trading (OFT) to interim FCA permissions to full permissions.
I think the concerns raised by the FCA are legitimate.
One of highlights for me is the regulator’s desire to have people know what they are getting into.
If the object of this exercise is for people to manage their own finances they should and deserve to get better information from lenders on what they are investing in.
If people are investing into a property ISA with some firms they don’t know what they are lending against.
I think the FCA is concerned that it is a bit of a black box for investor transparency.
Sometimes the FCA does go too far, but in general this is a positive step.