P2P Lending: Need FCA Interim Permission But Don't Offer Consumer Credit?

As mentioned earlier, this is a question on which I've have seen no official guidance on, but I have since followed up. 

In order to operate certain types of peer-to-peer lending platform after 1 April 2014, new regulations will requre you to be either fully authorised by the Financial Conduct Authority, or to have received 'interim permission' that is only available to operators who hold a consumer credit licence issued by the Office of Fair Trading.

But the scope of activity within the FCA regime is broader than the activities currently within scope of the OFT's consumer credit licensing regime. 

Whether your platform is 'in scope' for FCA purposes essentially depends on whether the platform enables loans to which individuals are a party as lenders and/or borrowers (either on their own or as a member of an unincorporated association or a partnerships of two or three). There is an exception in the case of borrowers, where either the lender provides the borrower with credit of more than £25,000 or the loan is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.

So, for example, platforms that only enable individuals to lend money to companies would not need a consumer credit licence, but would fall within the FCA's peer-to-peer lending regime.

However, I am reliably informed by the FCA that although the OFT would not normally grant licences to firms that may not necessarily require them, it is aware of the interim permission issue and is prepared to grant consumer credit licences to P2P platform operators who need one for interim permission purposes, provided they otherwise satisfy the licence criteria. Such operators should contact the Head of Credit Licensing at the OFT in advance of submitting the application. The application should cover all the activities the platform will undertake from 1 April 2014, including ‘debt administration’. 

Regulating Convergence

This week I get the chance to chat about my three of my favourite topics from a legal standpoint: payments, peer-to-peer finance and data. 

All three are in a state of regulatory flux (which is also making for some late nights). But that tells you a lot about where commerce, and society itself are headed. The much vaunted 'convergence' of Web 1.0 has definitely arrived.

As ever, the challenge for independent regulation of these areas is to approach electronic commerce in a holistic way that promotes competition and innovation, rather than in a blinkered fashion that results that strangles innovative services at birth...

It should be a lively week.

More in a wrap-up post at the end.

Applying For Interim FCA Consumer Credit Permission?

The Financial Conduct Authority is now open to receiving applications for interim permission to engage in consumer credit activity beyond 1 April 2014. Registrations prior to 30 November 2013 qualify for a 30% discount on the registration fee.

Here's the FCA's step-by-step guide; a timeline, which includes consultation on the regulatory details later this month followed by workshops around the country from October to March. There is also some information on being supervised by the FCA; and a note of the differences in the scope of the OFT and FCA regimes.

Here's the OFT's page on the topic.

There are some specific issues not covered in the material released to date. Most importantly, how do you apply where you will need interim permission, but you don't have a current consumer credit licence and your activities do not fit the OFT's current application form? 

Holiday Fun With PSD2

No doubt you've seen the proposal to revise the Payment Services Directive (PSD2), and related FAQs. 

More on the detail of that later, but one question that recurs to me, as I wade slowly through the treacle, is why a document that was due in November last year has had to be packed into everyone's beach bag for the summer of 2013. 

Just sayin'...

Mobile Wallet Payments: EPC White Paper

The European Payments Council has issued a white paper on mobile wallet payments in an attempt to drive (bank-centric) 'standards, best practices and schemes' for mobile payments. 

While comments from "all interested stakeholders" are welcomed by 30 September 2013, one needs to bear in mind that the EPC represents the European banking industry. The claim (in footnote 3) that the banking industry includes payment institutions is disingenuous at best. The creation of payment institutions via the Payment Services Directive reflected the European Commission's avowed intent to carve out payment services from the banking monopoly. Some PIs are members of the EPC but most are not, and it's especially telling that neither e-money nor e-money institutions are mentioned in this white paper at all, yet are firmly engaged in providing mobile payment services. 

You will also gather from the overly enthusiastic use of banking and payment applications during the "day in the life of Mr Garcia" that the EPC is not overly fond of retail apps that embed the payment step to the point of convenient invisibility.

As a result, the paper may be interesting if you want to know how retail banks view the mobile payments market segment, but if you're interested in payments innovation more generally you'll need to spend most of the time reading between the lines...

Image from BankingTech

Draft Peer-to-Peer Lending Regulations

The draft regulations enabling the Financial Conduct Authority to regulated peer-to-peer lending have been published for parliamentary approval (see Articles 36H-I). There have been some changes to since the previous version in the March consultation to remove certain issues. The more detailed FCA rules should be out with a further consultation paper in September/October.

Basically, your platform is 'in scope' for FCA purposes if it enables loans to which individuals are a party as lenders and/or borrowers (either on their own or as a member of an unincorporated association or a partnerships of two or three). However, there is an exception in the case of borrowers, where either the lender provides the borrower with credit of more than £25,000 or the loan is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower. 

E-money and Payments Law Update

The UK's Financial Conduct Authority has updated its "Approach" to regulating:

• Payment Services (marked version here) under the Payment Services Regulations 2009; and

• E-money (marked version here) under the Electronic Money Regulations 2011.

Worth a look at the tracked versions, especially if you are interested in 'passporting'.