FCA Moves To Pre-Empt Credit Pile-Up

The Financial Conduct Authority comes in for plenty of criticism, but it seems to be ahead of the game when addressing the potential credit disaster that is waiting to happen as the long-term effects of Covid-19 kick in.

The Financial Conduct Authority (FCA) has said guidance on payment deferrals for personal loan borrowers is expected to expire at the end of October but is being kept under review.

Struggling consumer credit borrowers have been allowed to request three-month payment deferrals since July under FCA guidance that is due to end on 31 October.

Updated draft guidance from the City watchdog said borrowers can still apply for the support until the end of October, meaning some deferrals could last until the end of January 2021, but added that the rules on granting payment breaks are still expected to end next month.

“We expect the July guidance to expire on 31 October but we will keep this under review depending on how the wider situation develops,” the FCA said.

The FCA is now consulting on draft guidance to replace the current forbearance rules.

The guidance urges firms to treat customers fairly and ensure payment arrangements are affordable.

It also suggests suspending, reducing, waiving or cancelling any interest, fees or charges for missed payments.

  • Our latest loan offering, the property-backed offering from WeBuyAnyHome.com, has attracted 22 per cent of the £150,000 it is seeking. The loan is rated A+ by our credit committee, and yields 8 per cent over a three-year term. For more detail, login.

Historical Performance And IFISA Process Guide

  • Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). 

That figure is the result of over £23 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.

  • Money&Co. has been lending for over 5 years and has facilitated over £23 million – with only two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.

All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.

So here’s our guide to the process:

  • Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
  • Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
  • Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.

The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.

Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.

Risk: Security, Access, Yield

Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.



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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.