It will have emerged when alternative finance is no longer seen as alternative, but simply a variation of the mainstream.
In February 2021, the FCA published the long-awaited Woolard Review, promising to impose more stringent restrictions on the largely unregulated sector, however, there are fears among some industry specialists that the regulation could be headed in the wrong direction.
The Coalition for a Digital Economy, or Coadec as it’s more commonly known, is calling on the Financial Conduct Authority (FCA) to tread carefully when introducing tighter restrictions on the buy-now-pay-later (BNPL) sector.
“There is a real need for speed when it comes to BNPL regulation,” Charlie Mercer, head of economic policy at Coadec, told AltFi. “This is because of two reasons. One there is clear evidence of consumer harm when consumers are not getting the best outcomes and using BNPL increases the amount they have to pay significantly.”
“Secondly, there is such a demand for regulation because it will bring more consistency and transparency to the sector and will help solve the conflicting messages we often see in the press about buy-now-pay-later. At the current rate, it’s just not sustainable, this is a classic example of where innovation has outpaced regulation.
Historical Performance And IFISA Process Guide
That figure is the result of over £24 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 2020/21 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.