The UK watchdog in charge of investor oversight proposed tough new regulations regarding peer-to-peer (P2P) lending platforms, in a bid to help consumers wade through the new landscape, according to a report by Reuters.
The Financial Conduct Authority is looking to tighten up oversight over loan-based crowdfunding platforms, which provide short-term lending for small businesses and consumers, in part to make sure customers have clear information about the rules, terms, and conditions.
A 156-page report by the watchdog found that some customers were subject to poor practices by certain online platforms and that they were provided with unsuitable products and poor treatment.
The reform measures have been backed by platforms like Funding Circle, a leading crowdfunding lender, as a way to gain more legitimacy as competition heats up with traditional banks. RateSetter, one of the three-largest P2P lenders in the UK, has also sought clarity on regulations as a means to better compete against established banks.
The proposed rule changes come in the wake of a 2016 study of regulations that govern the sector, which dates back to 2014.
The environment for P2P lending has recently come under scrutiny. In China, the P2P market has been hurt by a recent wave of defaults. A report in the Financial Times indicated that 150 lending platforms have had problems since the beginning of June, compared with 217 during the entire year of 2017. As such, investors have begun to withdraw their funds from the market.
US credit card firm Discover Financial told analysts just days ago that it would pull back from its participation in personal lending, as competition from FinTechs and concerns about pricing have increased and default rates have spiked.
US regulators have recently signaled concerns about the rise in FinTech companies jumping into the online lending arena. The US Treasury Department is expected to weigh in with recommendations on new regulations.
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