The UK’s financial watchdog has clamped down on peer-to-peer (P2P) lenders by announcing new rules aimed to protect investors.
The crackdown comes a week after the collapse of Lendy, one of the largest lending platforms in the sector, which has more than £160 million in outstanding loans and was more than £90 million in default.
The Financial Conduct Authority (FCA) has introduced the new set of rules, which it said will “better protect investors” while allowing lending platforms to operate sustainably.
It has placed a limit on P2P investments for retail customers new to the sector of 10% of investable assets.
The rules will ensure that new investors “do not over-expose themselves to risk”, it said, although the rules will not apply to customer who have received regulated financial advice.
P2P platforms, such as Funding Circle and Zopa, will now face marketing restrictions to protect new and less-experience investors.
The FCA has also said it is strengthening rules on plans for the wind-down of P2P platforms if they fail.
Platforms which offer home finance products will also need to adhere to the Mortgage and Home Finance Conduct of Business sourcebook.
These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunitiesChristopher Woolard, FCA
Christopher Woolard, executive director of strategy and competition at the FCA, said: “These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities.
“For P2P to continue to evolve sustainably, it is vital that investors receive the right level of protection.”
P2P peers will have to implement the new restrictions by December 9 2019, except for mortgage and home finance requirements which have been applied with immediate effect.
Yann Murciano, chief executive at P2P firm Blend Network, said: “We believe the measures promise to be a positive step forward for P2P platforms.
“We believe these measures will have a significant positive impact on the P2P industry, particularly on the way that loan risks and platform business models are assessed.”