55% of Growth Street investors support the new P2P regulations

The eagle-eyed among you may have seen that the FCA recently introduced some new regulations to the peer-to-peer investing sector. Designed to protect the investor and increase transparency, the rules put restrictions on the ways P2P platforms can market themselves, and aim to ensure investors understand the key risks.

We recently surveyed Growth Street investors on their opinions of the new rules. These included, for example, an appropriateness test to gauge new investors’ understanding of what they’re investing in, and limits on the amounts retail investors can invest in their first year.

I’m pleased to say that 55% of the 356 respondents from our investor base think the changes will increase the long-term sustainability of the P2P sector (with a further 25% saying it will have no effect at all).

I couldn't agree more. After all, Growth Street is relatively unique among P2P platforms by having already incorporated some measures similar to the new regulations since we opened to retail investors in 2016. As P2P investing continues to break into the mainstream and new investors enter the market, it’s important that all P2P providers are brought up to meet these standards.

What changes are being made?

There are a number of new regulations being introduced – you can read about them in depth here – however key points which will directly impact investors’ experience of platforms are:

1. When signing up to a P2P platform, individuals will be required to take an ‘appropriateness test’, to measure their understanding of P2P lending. As existing investors will know, Growth Street has always had an appropriateness test, and we will be revising this in the coming months to ensure full compliance with the new rules.

2. There will be limits placed on how much of their investable assets a retail investor can lend in their first year. We will be strengthening our requirements for retail investors to declare that they won’t breach this requirement, and put in place monitoring to alert investors who may have inadvertently crossed the limit.

3. A set of new rules have been introduced about how a P2P platform can market itself, and what information they need to make available. This is designed to allow individuals to easily compare different products and make more informed decisions about which option is most suitable for them. We will be reviewing our extensive information disclosures to ensure we continue to provide investors with the right level of transparency.

How are the new P2P regulations going to affect Growth Street investors?

Importantly, existing Growth Street investors don’t need to do anything as things stand – if that changes, then we’ll get in touch to let you know. Instead, you may simply notice a few small changes to some of the information displayed on your dashboard and around our website to bring us into line with the new industry standards.

So, what now?

As the P2P industry continues to mature, these new regulations are an important step for building confidence and cementing its position in the mainstream.

With all P2P providers needing to meet the new standards by 9th December this year, there’ll no doubt be a scramble among many to prepare for them. However, in my opinion, they should be welcomed with open arms – tighter controls to protect the investor, greater education and increased transparency is critical for the long term sustainability of P2P lending.

Written on in Investing
General Counsel