The U.K.’s peer-to-peer (P2P) lenders are hoping that tighter regulations by the Financial Conduct Authority (FCA) can help restore the sector’s damaged reputation.
Despite lending £6.7 billion (more than $8.5 billion USD) over the past 12 months, the country’s P2P sector has been hit with a number of issues, including the collapse of Lendy and the withdrawal of BondMason. In addition, the market became more hostile after the FCA set new rules to limit marketing, boost governance and credit underwriting, and force lenders to prepare for failure.
“People have had their chance to grow their business to a decent scale. That chance has gone now,” said Stuart Law, CEO of Assetz Capital, specializing in secured business loans, according to the Financial Times. “I think we’re going to see a big reduction in the market — we’ll end up, by next year, with a modest number of larger players who have a critical mass of reputation, credit quality and so on.”
There has also been a call for more regulation, especially after the collapse of Lendy last month, which left 20,000 investors at risk of losing a large portion of more than £160 million in outstanding loans on the platform.
“New regulations are welcome (and, in fact, desperately needed), but these new rules are five years too late for an industry that is now shaken by one of its largest platforms entering administration,” said Adam Bunch, co-founder of the Lendy Action Group this week to represent affected investors. “The FCA has been caught out by a new sector, which was left virtually unchecked and allowed to grow at a startling rate, with barely any regulation.”
Some of Lendy’s rivals believe that tougher rules should reassure customers about the strength of the remaining lenders.
“We think what is going to emerge is a much stronger industry where there is less doubt — fewer players, but probably stronger players with a bright future,” said Rhydian Lewis, CEO of RateSetter.