Major P2P providers unauthorised to offer Innovative Finance ISA days before launch date
Seven of the largest peer-to-peer lenders, including Zopa and Ratesetter, have confirmed they are still waiting for authorisation from the Financial Conduct Authority (FCA) to be able to offer Innovative Finance ISAs, which launch on 6 April.
This means prospective customers won’t be able to open one of the new ISA products – which enable savers to get tax-free returns on peer-to-peer loans – from the major platforms. (See YourMoney.com’s Peer to Peer Lending guide for more information.)
The seven platforms awaiting authorisation – Funding Circle, Landbay, Lending Works, LendInvest, ThinCats, Ratesetter and Zopa – collectively have around 90% of the peer-to-peer market share.
At the moment, only a handful of smaller platforms have received full FCA authorisation status necessary to offer the new Innovative Finance ISA, including Abundance, Crowd2Fund, CrowdStacker and Funding Tree.
The FCA confirmed eight firms have been fully authorised to operate P2P platforms as at 30 March 2016, while a further 86 await a decision, of which 44 have ‘interim permission’.
When do the major platforms expect to launch the Innovative Finance ISA?
YourMoney.com contacted all seven of the platforms which are members of the Peer2Peer Finance Association to ask about the delay. They told us that in addition to obtaining FCA approval, they are also required to gain ‘ISA Manager’ status from HM Revenues & Customs (HMRC) which will add more time to the process. None of the seven could give a definitive timeline (see below).
Why have smaller firms received authorisation sooner?
One suggestion is that it’s to do with a change to the authority regulating the P2P industry. The larger established P2P firms were previously regulated by the now defunct Office of Fair Trading before it was taken over by the FCA in 2014. These firms were then given interim authorisation from the FCA which allowed them to trade as normal but they were asked to apply for full authorisation.
In order to offer an ISA, a platform needs to be approved by HM Revenue & Customs as an ISA manager, and one of the preconditions for this is to have full authorisation from the FCA.
The smaller firms that came on the scene after the FCA took over regulation of the industry weren’t allowed to apply for interim authorisation and were instead required to apply for full authorisation right away, which is perhaps why some have been given this sooner than the larger players.
Why is there a delay?
An FCA statement reads: “It is important that applications from firms wishing to be fully authorised are properly considered and that the firms meet rigorous statutory standards. How long it takes to consider an application depends on a number of factors including the completeness of the application, the complexity of the business, and the firm’s demonstrated compliance with regulatory requirements. We have up to 12 months to reach a final decision.
“We have received a lot of applications for firms wanting permission to operate a P2P platform. Our consideration of whether to authorise firms as P2P platform operators is against a backdrop of recent changes to legislation which clarify how operating a P2P platform fits with other regulated activities. These changes came into effect in January and mid-March 2016”
What the seven P2P platforms told YourMoney.com:
Funding Circle: “Our conversations with the FCA are still ongoing.”
Landbay: “Things are progressing well with our FCA permissions application and we expect to be launching our Landbay Property-Backed ISA in April.”
Lending Works: “We are confident of being approved in the coming weeks.”
LendInvest: “We’re working with the FCA and are hopeful we will receive authorisation in due course.”
RateSetter: “We are still awaiting authorisation but the FCA is working hard and is aware of the deadline of 6 April to launch the product.” It couldn’t say whether it would have authorisation by 6 April.
ThinCats: It confirmed it has not received authorisation and said it was “hard to say” as to when it would gain the approval.
Zopa: It said it submitted its application to the FCA last year but had still not received authorisation, adding that it’s an “ongoing process”.