Advisers will not be able to charge commission on peer-to-peer lending agreements, the FCA has proposed.
Consumers looking to use the incoming Innovative Finance Isa for certain P2P lending agreements should receive information on issues, including the potential tax disadvantages of the loan not being repaid, the regulator has said.
In a discussion paper published last week, the regulator proposed to “add further guidance on the information firms should provide to consumers, which will apply when P2P agreements are to be held in an Innovative Finance Isa wrapper”. The Innovative Finance Isa is set to be introduced from 6 April.
As part of its proposals, the FCA will look to apply rules banning the payment or receipt of commission by firms in relation to recommendations involving advice on P2P agreements.
The regulator also wants to “ensure financial advisers who advise on P2P agreements are appropriately supervised and assessed as competent to carry out that activity, including attaining an appropriate qualification”.
The FCA is also looking to put in place rules stating that firms, where relevant, should disclose details about issues, including the potential tax disadvantages of a consumer investing in a P2P agreement that was not repaid, and of a scenario where the firm operating the platform involved were to fail. The guidance would also look at the procedure for transferring some or all of the P2P agreements held in the wrapper from one Isa manager to another, and how long this may be expected to take.
The FCA is also considering whether to make providing advice about loan-based crowdfunding investments a regulated activity.
Those wishing to respond to the latest consultation paper must do so by 15 February.
Last month, peer-to-peer lenders RateSetter, ThinCats, Funding Circle and Zopa stated there had been strong interest in the Innovative Finance Isa from new and existing customers.
Adviser view
Paul Howard, financial adviser with Berkshire-based Box Financial Planning, said: “Peer-to-peer lending is an area I am concerned about because it is an investment area that has not yet suffered a downturn, and I think it could be the next thing to hit the headlines.
“If they allow them into Isas it may make them appear more stable than they are, and it will be an absolute disaster when it goes wrong.”
