Dear P2P lending... a hail and farewell to the Peer-to-Peer Finance Association

By Paul Smee on Tuesday 14 January 2020

OpinionAlternative Lending

A new trade body for Peer-to-Peer Lending is going to have to monitor the effect of new FCA rules writes Paul Smee, Retiring Chair of the Peer-to-Peer Finance Association (P2PFA).

Dear P2P lending... a hail and farewell to the Peer-to-Peer Finance Association
Image source: Pexels.

This is the last blog which I will pen as Chair of the P2PFA, as the Association is winding down and its role as advocate and explainer for the peer-to-peer sector is passing to Innovate Finance. It is nearly a decade since the P2PFA was formed but, even in that short existence, it has run up a few battle honours which show what a representational body – however small – can do for a sector.

Peer to peer lenders will now be able to join the 36H Group of Innovate Finance which will have an agenda of representing the lenders to the authorities and promoting the rationale for and image of the sector that is not a million miles from that of the old P2PFA Board. It is going to be chaired by the CEO of Innovate Finance, Charlotte Crosswell who will be able to bring her considerable knowledge of FinTech to bear and provide the sort of lateral connections which can make trade association lobbying especially effective.    

I am glad that five platforms have already signed up to join the 36H Group and I am sure that others will follow.

Peer to peer lenders are going to have to address what I might call growing pains over the next few years. The sector is now fully regulated by the FCA and its trade body is going to have to monitor the effect of their rules on business development and be quick to propose changes if the market appears to be suffering. Lenders are also going to have to be alert to wider regulatory changes for example in the approved persons regime. It makes sense for those alerts to be provided by a body like Innovate Finance which is looking across the same waterfront for many others amongst their membership.

Synergy is important but so too is identity. Innovate Finance will run a group just for its peer-to-peer members. This should be able to replicate the sort of group dynamic that made P2PFA Board meetings such a valuable opportunity for industry leaders to come together and discuss where the sector was going, what it needed to thrive and how Government and the regulators could help or hinder that process.

One role will not survive into the new world; when P2PFA was formed, there was no regulation in the sector. Firms saw that this would quickly be an inhibitor on market growth. So P2PFA lobbied for regulation; and it also became a self-regulating body which required all its members to adhere to operating principles which especially covered what information was disclosed to investors. It introduced these high levels of transparency because it saw this as the way to create a confident investor community which would lead to a thriving peer to peer market. Who can say that they were wrong? I pay a tribute to the original drafters (of whom there were many but perhaps I can mention Christine Farnish, my predecessor as chair and Robert Pettigrew, the Director of P2PFA). Their work was largely adopted by the FCA drafters when statutory rulebooks arrived. Imitation, as usual, is the sincerest form of flattery.

So P2PFA had to evolve as one of its principal services was no longer required. One consequence of this evolution is that the stringent membership requirements which surrounded P2PFA membership can be relaxed. Members had to go through a serious and detailed examination of their business to ensure compliance - and the ability to continue to comply – with the operating principles. This took me some adjustment as I had always gone for maximum numbers of members, with no (or very few) questions asked. But the Operating Principles could not be taken for granted. So we required members effectively to sit an examination before they joined. It is now easier to take FCA authorisation as an effective proxy and be open to all interested parties. It would be great if more platforms took up this opportunity. Trade bodies are a great way of keeping informed about the business environment within which you operate. That information – and the ability to influence the course which that environment will take - will be ever more important as the sector grows both in size and economic impact.

Moving the P2PFA’s work to a better-resourced trade body with a strong reputation, a good network and a good reputation with the authorities seems a logical step. I wish the new venture every success.

Paul Smee is the Retiring Chair of the P2PFA. The views and opinions expressed are not necessarily those of AltFi.

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