Peer-to-peer trade body is axed as lenders such as Funding Circle, RateSetter and Zopa join a wider fintech group
- Peer-to-peer platforms take money from investors and lend them to borrowers
- Since 2011 they have been represented by a self-regulating trade body
- They have now become part of a wider fintech group amid continuing concerns over the future of the sector as platforms pull out of casual lending
The UK’s self-regulating trade body for peer-to-peer platforms has been disbanded and five lenders have instead been subsumed into a separate industry body representing fintech companies.
Funding Circle, RateSetter, Zopa, Lending Works and CrowdProperty have become the founding members of the 36H Group, part of Innovate Finance, which has around 250 members and also represents the likes of Atom Bank, Dozens and Moneyfarm.
This replaces the now extinct Peer-to-Peer Finance Association, a self-regulating body founded in 2011 which set core principles for lending platforms.
Peer-to-peer: The industry, which cuts out the middleman, has axed its independent trade body
P2P lending platforms take money from investors and hand it out to borrowers in exchange for a return.
They are regulated by the Financial Conduct Authority but are not covered by the Financial Services Compensation Scheme if loans go bad or returns are not as advertised.
In a statement on its website announcing the launch, Innovate Finance said that ‘the P2PFA has achieved its objective of ensuring robust and appropriate protections for consumers’, following new rules on peer-to-peer lending which came into force in December.
However, the P2PFA had just six members which accepted funding from casual investors last month after platforms ThinCats and Landbay announced they were closing business to everyday lenders.
It raised the question of whether retail peer-to-peer lending was dying off, after the new rules from the FCA banned casual investors from putting more than 10 per cent of their assets into the sector.
ThinCats had made just two loans in 2019 funded by retail investors, while casual investors in Landbay made up just 3 per cent of its lending by the time it shut its doors.
As well as the cap, the regulations also require platforms to assess investors’ knowledge and experience of P2P investments before allowing them to invest.
This potentially places a greater burden on platforms, who may decide given their limited inflow from everyday investors that it is no longer worth it.
Peer-to-peer investors have also been stung by the high-profile £152million failure of property lender Lendy, and the fact those trying to sell investments in Funding Circle on its secondary market have faced increasingly long waits to do so.
Paul Smee, chairman of the P2PFA, who will not be involved in the new trade body, said: ‘We can be very proud of what the P2PFA accomplished over the last eight years.
‘We were set up to ensure the innovative and rapidly growing lending platform sector maintained the highest standards of customer protection.
‘We worked hard to achieve our goal of securing effective external regulation, which I’m pleased is now in place.
‘Now that platforms are in the mainstream of financial services for both investors and borrowers, this is the right moment to recalibrate, and I look forward to seeing the industry go from strength-to-strength into the future.’
According to the announcement, any platform authorised and regulated by the FCA can join the new group.
The chief executive of Innovate Finance, Charlotte Crosswell, said: ‘The new regulations introduced at the end of last year will assist its development into a mainstream investment option open to everybody.
‘Innovate Finance is committed to supporting forward-thinking UK fintech innovators like those in the lending platform sector, and I look forward to chairing the 36H Group.’