What is P2P finance?
Peer-to-Peer (P2P) Finance is an innovative way of enabling consumers and businesses to borrow and lend money. P2P enables people who have money to put it to work for competitive returns through lending to other individuals or businesses online. P2P was pioneered in the UK in 2005 and by Q4 2015 platforms have enabled lenders to provide over £4.4billion of funds to UK consumers and businesses, with expectations that the sector will continue to double in size every six months going forward.
Is P2P lending regulated?
From April 1st 2014 the peer-to-peer lending industry became regulated by the Financial Conduct Authority. The regulation requires peer-to-peer lenders to have minimum operating capital requirements, meet client money requirements and adhere to a disclosure based regime. Here is a link to the FCA’s summary guide: https://innovate.fca.org.uk/innovation-hub/summary-rules-loan-based-crowdfunding-platforms
For the Regulatory Activities Order of what constitutes regulated P2P lending -see article 36H http://www.legislation.gov.uk/uksi/2013/1881/article/4/made
NB: Peer-to-Peer Invoice finance platforms are not regulated by the FCA.
What does the P2PFA do?
The Peer-to-Peer Finance Association (P2PFA) was founded in 2011 by Zopa, FundingCircle and RateSetter as a self-regulatory body for the sector to promote high standards of conduct and consumer protection. In December 2012 Christine Farnish CBE was appointed as the P2PFA independent chair and in February 2015 Tony Boorman was appointed Independent director. The 3 main objectives of the Association are:
- to seek to secure public policy, regulatory and fiscal conditions that enable the UK-based peer-to-peer finance sector to compete fairly and grow responsibly;
- to ensure that Members demonstrate high standards of business conduct, to demonstrate leadership and to promote confidence in the sector; and
- to raise awareness and understanding of the benefits and risks of peer-to-peer finance;
Members of the P2PFA are required to meet our robust rules and operating principles for the transparent, fair and orderly operation of P2P finance.