Does FCA Regulation Really Matter To P2P Lenders? Plus Loan Latest

Following last Friday’s News article looking at the forthcoming rule changes to regulation in the peer-to-peer (P2P) lending sector in which Money&co. operates, comes another question: Does FCA regulation make a difference?

The jury, according to this article from P2P Finance News (excerpt below) is definitely out on this one.

When Lendy collapsed last month, it was fully authorised by the FCA. So should this mean better news for the property platform’s investors?

“I think there is scope for investors to be reassured by FCA authorisation as there are black and white rules that Lendy had to follow,” Frank Wessely, partner at Quantuma, told Peer2Peer Finance News.

“It appears that Collateral was to a large degree ‘smoke and mirrors’ – whether that was intentional remains to be seen.”

However, Wessely noted that investors might have unrealistic expectations of the protection that FCA approval provides.

“I expect that investors are looking for reassurance and leadership from the FCA in the area of regulation, after the collapse of [mini-bond provider] London Capital & Finance, Collateral and Lendy,” he said.

“However, what investors expect and want and what the FCA can provide might be two different things.

“I think non-sophisticated investors place too high a regard on FCA authorisation, expecting benefits and a level of protection that just aren’t there.

“We need clear messages on what FCA authorisation actually covers and what it means for investors, so that there is a greater appreciation of associated risks.

Loans – Latest News

The latest loan from property-backed Seascape is now available. This A-rated tranche yields 8 per cent gross and has a five-year duration.

A Process Guide To Innovative Finance ISA Investment

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 £17 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. The annualised bad rate on Money&Co. loans in five years of trading is under 0.04 per cent.

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 2018/19 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.