Another day, another peer to peer lending event. Given the implementation date of the new regulations is fast approaching, perhaps that’s not surprising. More surprisingly, TISA met with the FCA on 12 November. Less than a month from the 9 December deadline, the topic was deferring one of the most controversial new requirements – the P2P marketing restrictions.
At the recent TISA P2P forum, chair and technical policy director Jeffrey Mushens was open about the association’s urgent goal.
P2P marketing restrictions
Discussing the new marketing and investment restrictions that limit those who are not sophisticated, high net worth or advised investors to allocating a maximum of 10% of their investable assets to P2P, Mushens voiced strong concerns about their impact. Noting the drop in the number of new Innovative Finance Isa (IFISA) accounts since the announcement of the rule changes, Mushens said, “the FCA’s marketing restrictions run counter to HMT policy objectives in this area.”
With predictions that the inflow of investment into P2P will suffer, he may well have a point. HMT’s policy objectives are to, “increase the choice and flexibility available to ISA investors, encourage the growth of peer to peer lending and improve competition in the banking sector by diversifying the available sources of finance.”
TISA champions consumer protection, “in an appropriately regulated sector to deliver more choice and competition to investors”. But Mushens bemoaned what appears to be special treatment for P2P. “The 10% restriction doesn’t apply to equities, funds or any other mainstream asset class”, he said.
“Inappropriate and overkill”
Christine Farnish, former chair of industry body the P2PFA and now a board member at Zopa, was also critical. She called it “inappropriate and overkill”, to apply the new marketing rules on the entire range of the P2P market, from what she called “low to high risk.” She went on, “if the FCA wants to be risk-based and proportionate, they should differentiate.”
It is this sort of opposition that is driving TISA to lobby the deferral of the 10% restriction. Instead TISA argues the effects of the new appropriateness tests, designed to ensure investors fully understand what they are investing in along with its associated risks and mandated in the new regulations, will render the 10% restriction unnecessary.
While a popular move with many platforms, the likelihood of any changes to the announced P2P marketing restrictions seem slim. But getting the meeting at all in the current chaotic political and economic context could be considered against the odds.