Advisers looking to add peer-to-peer lending into their client’s Isas may find that competition and choice in the P2P market has been reduced due to strict FCA authorisation processes.
More than a quarter of applications from peer-to-peer lenders seeking FCA authorisation have been withdrawn since April 2014, raising concerns that the regulator’s processes may be too onerous.
According to regulatory consultancy Bovill, the FCA has received 114 applications from new P2P lenders seeking full authorisation since the start of April 2014 when the FCA took over the regulation of the consumer credit industry from the Office of Fair Trading.
However, 30 have now now been withdrawn – of these 23 were partial withdrawals where the applicant withdrew certain regulated activities from its application but went ahead with others.
Gillian Roche-Saunders, head of venture finance at Bovill, said: “The high number of withdrawals suggests that the FCA is setting the bar high when it comes to full authorisation for P2P lenders. The process appears to be much tougher and more costly than many firms first anticipated.
“P2P lenders have enjoyed a relatively light touch approach from the regulator for some time. A rigorous authorisation process will have come as a shock to the system, particularly for smaller and less profitable lenders.”
Right to reply
The FCA declined an invitation to comment
