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Tyrie warns FCA on regulation of peer-to-peer lending

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Treasury committee chairman Andrew Tyrie has written to the FCA and the Prudential Regulation Authority warning on the risks of peer-to-peer lending and questioning whether current regulation of the market is appropriate.

In a letter to FCA chief executive Tracey McDermott and PRA chief executive Andrew Bailey, Tyrie asked how P2P platforms judged creditworthiness.

He also challenged the regulatory bosses on how P2P users knew they were getting accurate information and how they could assess the risks of this lending.

Tyrie also had reservations about P2P’s resilience to future economic shock.

He says: “The committee is concerned to ensure that the FCA is paying due attention to the risks – and the opportunities – afforded by the growth of P2P lending and related markets.

“Government policy – letting P2P investments form part of an Isa allowance, for instance – represents a form of official support for investments that may be inherently higher risk.”

Tyrie points out P2P loans are estimated to have totalled £4.4bn in the final quarter of 2015 – up from close to zero five years ago.

He adds: “Whether and, if so, to what extent investors would benefit from stronger consumer protection now needs careful thought. Poorly informed investors may be left with a false sense of security about the balance of risks versus returns.

“But greater regulation is not necessarily the answer. If this market can substantially increase competition it may offer benefits to the consumer.

“It is crucial that the regulator is doing what it can to find the right balance between these risks and opportunities.”

Tyrie also says the wider prudential risk of unsecured loans on the rest of the financial sector is also unclear.

He says: “The sector’s ability to see through an orderly decline should be considered sooner rather than later.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 2nd June 2016 at 10:29 am

    Since when did the FCA take a scrap of notice of Andrew Tyrie’s views on anything? It doesn’t have to so it simply doesn’t.

  2. 1) Not all P2P lending is unsecured.
    2) Bank of England & Fed Reserve stats show there hasn’t been a year with negative returns on credit card lending in at least 16 yrs! Avg net yield of 6.4%, compare that to equity volatility & suspended property funds – which would your clients say is ‘less risk’?

  3. “Government policy – letting P2P investments form part of an Isa allowance, for instance – represents a form of official support for investments that may be inherently higher risk.”

    Isnt Mr Tyrie part of that same government that unleashed P2P lending in ISA’s onto the public last year and if i heard right, intends to expand this to equity based crowdfunding? (yes thats unlisted private shares in your ISA!)

    Why wasnt he lobying the then Chancellor, Mr Osbourne, to stop the “higher risk investments” falling into the trusted ISA brand (and its the trust the public place in such a brand that may be its undoing with P2P).

    All very well blaming the FCA for not regulating it strictly enough, but they didnt create the mess in the first place – Government policy did.!!

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