The European Banking Authority (EBA) is looking into how the business of peer-to-peer (P2P) lending is conducted. The UK P2P sector has had its own problems with the collapse of Lendy – which was regulated by the Financial Conduct Authority (FCA) but still failed. See our take on the way forward here. Problems experienced with unregulated investment firms have compounded the problem.
In the UK, the FCA is subject to a chorus of disapproval and calls to action from many commentators. Now, there’s a call from the EBA for “cross border P2P and crowdfunding regulations to go further to protect consumers”, according to our friends at P2P Finance News.
The European Parliament is currently considering proposals to create a single market-wide crowdfunding licence that allows platforms to operate across the EU under a single set of regulations.
But the EBA notes that this may not provide protection for consumers investing with domestic-focused firms that aren’t currently regulated.
It suggests this could be remedied by introducing “harmonised consumer protection” and anti-money laundering rules for all crowdfunding and P2P firms across the European Union.
Loan Latest And IFISA Process Guide
That figure is the result of over £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.
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:
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.