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UK peer-to-peer (P2P) lending platform Lending Works said on Thursday it has received full authorization from the UK Financial Conduct Authority (FCA). Prior to that, the platform operated under interim permission from the regulatory body. Lending Works applied for authorization last October.
“To receive FCA full authorization marks a momentous day for Lending Works. This achievement is the culmination of what has been an intensive journey for us over the past year and vindicates all that we do and stand for as one of the UK’s leading P2P platforms,” Nick Harding, founder and CEO of Lending Works, said. “It also firmly validates our processes, systems, policies, financials and levels of compliance and risk management,” he added.
By obtaining full authorization, Lending Works will be able to benefit from new tax-free returns on P2P loans under the Innovative Finance ISA (IFISA). The platform intends to obtain ISA manager status from the UK’s HM Revenue & Customs (HMRC) and to introduce IFISA to its clients in the near future.
“With full authorization in hand, the next step for us is to launch our new ISA – something we have spent much of the past few months preparing for,” Harding said. “Given the great benefits this new tax-free wrapper will bring, the level of enthusiasm among our lenders, and indeed consumers within the wider sector, for the new IFISA has been substantial.”
As of 6 April this year, the IFISA allows UK investors to lend money using FCA-regulated P2P lending platforms and receive interest and capital gains tax-free. Otherwise, all lending interest is subject to taxation. P2P lending is not protected under the Financial Services Compensation Scheme (FSCS) and lenders’ capital is at risk. The IFISA provides support to some degree to lenders, but only of the lending platform they use is fully licensed.
The license followed a thorough review process which lasted nearly a year. The P2P lender said that during the licensing period it underwent rigorous regulatory evaluation and scrutiny across all business areas.
“[…] We have always supported greater regulation in this sector and welcomed the FCA’s review. The authorization process is a positive move that will give better protection to consumers, ensure greater transparency and accountability in our sector and will ultimately help grow the profile of peer-to-peer lending in the UK as a genuine, strong and competitive alternative to mainstream, traditional lenders,” Harding noted.
Peer-to-peer (P2P) lending is a type of crowdfunding based on loans. Borrowers get loans from investors, being it individual or institutional. Both borrowers and lenders benefit from better interest rates and returns on investment, respectively, compared to traditional financing methods. In addition, there are no intermediation parties as money change hands directly.
P2P lending is regulated in the UK by the FCA since April 2014. Recently, the Peer-to-Peer Finance Association (P2PFA) published a report which indicated that P2P lending is more likely to increase competition within the UK lending markets, rather than to distort competition. It also showed that new P2P loans accounted for 0.8% of the total consumer and small business loans provided in 2015,
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