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How bad is the peer-to-peer lending sector’s wholesale problem?

AltFi Data numbers reveal extent to which peer-to-peer lenders have been lending to each other.


On Tuesday, the FCA sent letters to the CEOs of a number of peer-to-peer lending companies, warning them that lending to other lending businesses would not be tolerated. The regulator’s director of supervision Jonathan Davidson wrote that a lending business which borrows through a platform in order to then lend that money onto others may be “accepting deposits”. He added that this could amount to “a criminal offence”.

The letter went on to explain that firms which have been facilitating loans for lending businesses should put a stop to this, and should consider how to ensure that it does not happen again.

Of the UK’s “big three” peer-to-peer lenders, Funding Circle and Zopa have each stated that they have never engaged in wholesale lending.

RateSetter, on the other hand, admits to having lent to other lending businesses since 2013. But the firm began the process of wrapping up these activities of its own accord in December 2016, shortly before being advised by the FCA to do so.

But what proportion of RateSetter’s loanbook does wholesale lending account for?

According to AltFi Data,RateSetter has originated £273m loans to lending businesses to date, equating to 15.6 per cent of its £1.748bn cumulative lending total.

Of its £709m in loans outstanding, £95m (7.5 per cent) are loans to lending businesses.

However, wholesale loans continue to surface in RateSetter loanbook, according to AltFi Data’s records. But RateSetter says that these are refinancing loans, and reiterated that it is no longer writing new loans to other lending businesses.

But this story extends beyond the “big three”. Take Crowdstacker, for example. It’s a business lending platform which was one of the first to receive full authorisation from the FCA (and subsequently ISA manager permissions). It is also a lender to other lending businesses.

Amicus Loans, a property lender, has so far raised close to £14m through Crowdstacker. The platform’s investors are being offered a gross interest rate of between 4.32 and 5.43 per cent (depending on the term) for investing in the deal. The Amicus campaign accounts for the vast majority of the c. £21m in lending that has been facilitated by Crowdstacker to date.  

But Mark Bristow, co-founder of the company, says his business isn’t affected by the FCA’s letter.

"Crowdstacker is not affected by the recent FCA letter regarding lending to lenders as a result of the way that Crowdstacker structures its loans,” he said. “Crowdstacker structures the loans on its platform as secured loans, where the borrower in turn lends to others, so that the borrower is not ‘accepting deposits’.”

"In the case of Amicus, for example (which is a business that has raised money on our platform and which is itself a specialist lender) Amicus gives security over assets for all monies lent to it, and is therefore regulatory compliant.”

"We understand there are some other platforms which do not employ this structure of security and this has led to these current difficulties. Ultimately the FCA's role is to protect consumers and ensure that P2P platforms comply with the law."

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