Australian Regulator Weighs in on Marketplace Lending

By Guglielmo de Stefano on Wednesday 23 March 2016

Savings and Investment

ASIC Releases Guidance for local market. 


The Australian Securities and Investments Commission (ASIC) today announced the release of an information sheet, containing guidance and best practices to be followed by Australian peer-to-peer lenders. The regulator revealed that a number of marketplace lending entities were consulted in preparing the document.


The information sheet describes what peer-to-peer lending is and details the existing regulatory regime, as well as outlining examples of best practice. ASIC admitted it would review the guidance in light of any future changes in the law or business structures.


ASIC Commissioner John Price commented:


“We want to help innovative start-ups understand the regulatory framework they are operating under.”


'Marketplace lending is a new innovative product and this information sheet is an example of how ASIC's innovation hub is helping innovative businesses understand their regulatory obligations to support them to grow and develop in Australia”


Although the Australian peer-to-peer lending industry is not covered by banking rules, providers of marketplace lending products and related services generally need to hold an Australian financial services (AFS) licence as well as an Australian credit licence – if the loans made through the platform are consumer loans.


Policy makers are keen on highlighting that these requirements ensure that retail investors have access to sufficient information to make an informed decision about whether or not to invest – as with other financial products regulated under the Corporations Act 2001.


In addition to the credit licence, consumer-lending platforms need to comply with requirements in the National Consumer Credit Protection Act 2009 – accessible here – and the National Credit Code. However, for all loans (including business loans) consumer protection provisions in the Australian Securities and Investments Commission Act 2001 apply, including prohibitions on misleading or deceptive investment representations.


In terms of good practices, the regulator suggests that marketplace lenders consider various strategies to assist investors in understanding their products and the associated risks, including:


  • referring investors to the marketplace lending information available on the MoneySmart website;
  • providing investors with an appropriately designed risk warning statement;
  • providing investors with an optional 'knowledge test for investors' to assess their understanding of the product before they invest;


Price concluded:


“Adopting some of these good practices can help investors understand the product and risks and build community trust and confidence in marketplace lending more generally.”

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