Landbay, the peer-to-peer lending platform for buy-to-let mortgages, has been granted full authorisation by the FCA. The platform now joins a small group of mostly early stage peer-to-peer lending platforms in being eligible to pursue ISA manager status. Some platforms, such as Crowd2Fund and Crowdstacker, have already been offering IFISA products for some time. More recently authorised players such as Folk2Folk and Lending Works are currently awaiting the go-ahead from HMRC.
Peer-to-peer lenders must be fully authorised in order to become ISA managers, and the very largest platforms in the sector – such as Zopa,Funding Circle and RateSetter – continue to operate under interim permissions.
Landbay was established in 2013 and has lent over £42m to date, spread across 241 loans. The platform exhibited rapid growth early on, but its lending has ground to an almost complete halt in the latter stages of 2016. CEO John Goodall (pictured above) tells us that this slowdown in loan originations is the result of both a “long summer” in the buy-to-let space (due to changes to the Stamp Duty Land Tax), and of changes made to the platform’s investment process. The platform began originating again in earnest in September and expects a number of deals to close and be listedon the site in January.
36H is the regulatory term for the rule-set relating to peer-to-peer lending. In the future, only platforms which are fully authorised under 36H permissions will be eligible to accept retail investment.
Until recently, all loans on the Landbay platform were pre-funded by an institutional partner, and these loans were then effectively refinanced by individual investors. Over the past few months, however, the firm has been forced to make changes to its approach to suit the regulator’s requirements and to remain 36H eligible. Landbay no longer pre-funds loans.
This shows a clear sign of intent from the regulator. It suggests that the days of platforms pre-funding or part-funding loans using either their own money or institutional capital are numbered. There is still a significant role for institutional capital to play within the sector, but it would appear that it will need to be kept wholly separate from retail capital (i.e. funding whole loans only) in order to satisfy the regulator.
“For the past 14 months we have worked hard, in collaboration with the regulator. As our industry continues to grow and mature, it is only right that regulation should evolve in line, and we welcome the detailed approach the regulator has taken throughout the process,” said Goodall. “This is a significant milestone for Landbay and we look forward to launching our property-backed ISA before the end of the tax year.”