Peer to peer lending: An industry that wants to be regulated

the houses of parliament


Peer to peer funding is currently an un-regulated activity in the UK.  Today, FundingKnight CEO Graeme Marshall explains why people to business lenders like FundingKnight would welcome regulation.


In an age where the country has gone regulation-mad, it is unusual to find an industry crying out to be regulated. When this happens, the government should pay close attention, as the industry is usually right.

The founders of the UK’s largest P2P lenders joined forces to call for their sector to be regulated last autumn in response to “fears that “shoddy operators” could put consumers’ money at risk.  The founders have also established a self regulatory body that they hope will act as a ‘blueprint’ for regulators.”

By establishing the Peer to Peer Finance Association (P2PFA) as a self- regulating body to set standards for the industry, the leading firms engaged in P2P and P2B lending have made just the right early move. The Rules and Guidelines for their members both set standards for consumer protection and form a clear pathway to appropriate regulation for the industry.

Alongside setting rules to regulate themselves, the P2PFA has rightly called upon the government to introduce regulation to oversee Internet- based matched lending – the process in which many lenders ‘club together’ to jointly fund a loan to a borrower.

Although matched funding does not in itself require much capital, as the firms don’t actually do the lending themselves, the principles behind holding client money and assets, selling practices,  clear explanation of services and costs etc are otherwise no different from mainstream lending.

Effective regulation will reduce the risk that poor practice by marginal operators will bring financial harm to lenders and tarnish the reputation and growth of this exciting and much needed sector of the lending market.

Indeed, Giles Andrew, the founder of Zopa, has been lobbying the FSA and the Government for greater regulation for some time now.  He is also pushing for ISA status for peer to peer lending and hopes that the P2PFA will “provide impetus for regulators:

We want to provide comfort to consumers that the businesses conform to some public operating standards and provide a useful blueprint to shove in front of would be regulators.”

Back in 2004, I found myself in a similar position in equity release, when the government decided to regulate the main product (lifetime mortgages) but not the alternative product –  Home Reversions. At the time I was on the board of Safe Home Income Plans, the industry body for equity release, and chaired their home reversion product board. SHIP decided to campaign for regulation and, following a formal consultation we were successful in bringing the matter to the House of Commons for debate. MPs quite appropriately questioned the point of adding yet more legislation to the statute book. The response that “the industry had themselves asked for it” carried the day. Home Reversions have consequently been regulated since 2007.

We at FundingKnight wish the P2PFA every success in calling for appropriate regulations over arranging and marketing P2P lending.  We intend to be active in supporting their aims – and, in particular, campaigning for regulation.

Photo credit used under Creative Commons Licence



6 thoughts on “Peer to peer lending: An industry that wants to be regulated

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