Dear Mr. Bailey, “The Peer-to-Peer Lending Sector Has Embraced a Level of Transparency Which is Unrivaled in Financial Services”

Andrew BaileyThe UK Peer to Peer Finance Association has released a letter addressed to Andrew Bailey, Chief Executive of the FCA, buttressing their position regarding the recent dialogue with the House of Commons’ Treasury Select Committee.

This past June, Andrew Tyrie, MP, Chairman of the Committee, expressed concern regarding the risk of peer to peer lending. In an open letter to Bailey (then Deputy Governor of the Bank of England for Prudential Regulation) the Committee expressed its concern “to ensure that the FCA is paying due attention to the risks – and the opportunities – afforded by the growth of peer-to-peer lending”.  At that time Christine Farnish, Chair of the P2PFA, welcomed the Committee’s interest and embraced the importance for consumers to familiarise themselves with the P2P.  Today Farnish is responding to oral evidence presented by Bailey last week to the House of Commons Committee. Bailey visited the House of Commons as part of his appointment process and was queried about the risks relating to peer-to-peer lending platforms, along with many other topics at that time.

In her response, Farnish asserted that peer to peer lending platforms “exist solely because they create value to consumers on both sides of the platform: investors are able to earn fair predictable risk-adjusted net returns that can outperform other investment products, whilst borrowers can access fast and flexible finance.”  Farnish asked that Bailey and the FCA “would start from first principles, based on risks and benefits to consumers.”

Christine FarnishFarnish assured Bailey, and others, the sector “accepts its responsibility for ensuring that those investing in peer-to-peer products understand the nature of their investment, and appreciate the degree of risk incurred.”

“the peer-to-peer lending sector has embraced a level of transparency which is unrivalled in financial services,” stated Farnish.

While Crowdfund Insider was not in possession of the transcripts, it is apparent that Chris Philip MP, played an interesting role in the discussion with Bailey. One area that Philip allegedly pinpointed was the possibility of platform co-investment in each and every loan. Farnish stated;

“ensuring that investors are empowered to appraise a peer-to-peer lending platform’s credit decisions and performance obviates any requirement to mandate co-investment. I would observe that it is not a requirement for asset managers to co-invest, despite incurring greater levels of risk within their investment portfolios.”

The FCA is in the midst of a regulatory review regarding crowdfunding which encompasses P2P. Some industry participants are of the opinion that traditional financial firms are lobbying vigorously to protect their reign as dominant providers of financial services – to the detriment of alternative finance and consumers. The P2PFA expressed the importance of consumer protection and appropriate regulation – along with robust transparency. Farnish closed her missive stating;

“I look forward to continuing to contribute to the on-going debate about where the appropriate balance of regulation should lie.”

The letter is embedded below.

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