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36H The New Measure For Platform Lending - Plus Loan Latest
No-one could accuse the platform lending sub-sector of the alternative finance industry of chasing snappy PR concepts. Following the demise of the P2P Finance Association (which only had a handful of big players, anyway) the quango Innovate Finance has announced the launch of a new body 36H.36H is not a clothing measurement, but a reference to a piece of financial-services legislation. Catchy.
The lending platform industry – a pioneer in the UK's thriving FinTech sector – has opened up access to lending as a mainstream investment class to consumers for the first time. Retail investors can earn stable and attractive returns by lending directly through these platforms to creditworthy borrowers, including consumers, small businesses and house builders. The industry has delivered several hundred million pounds of interest for investors across the UK, including within the tax-free wrapper of the Innovative Finance ISA.The 36H Group – named after Article 36H of the Financial Services and Markets Act 2000, which is the legal basis for retail investment via lending platforms – provides a unified and strong voice for lending platforms. The Group sits within Innovate Finance and works closely with regulators, policymakers and other stakeholders as well as promoting the benefits the industry is delivering, including bringing choice, competition and transparency to the lending and investment markets.READ MORE
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Platform Loans - Survival Of The Fittest
The latter part of 2019 has seen, quite rightly, a greater focus on the regulation of process and enhancing transparency requirements in the sector following the failure of peer-to-peer (P2P) platforms such as Lendy. Lendy's failure was linked – completely unfairly – with a number of problems experienced by investors in unregulated investments, notably mini-bonds. The best-known of these failures the London & Capital Finance debacle. It's in the light of these problems that the FCA decided to propose a limit on investor exposure to alternative loan assets.The essence of the FCA's proposal is this: Investors should not commit more than 10 per cent of their portfolio to platform lending (aka P2P). The move comes amid a broader drive towards greater transparency in reporting defaults and bad debts in platforms' loan books, more scrupulous risk management requirements and clarity on dealing with wind-downs in the event of a platform failure.As far as the alternative lending sector is concerned, the 10 per cent limit is actually good news. Consider the figures:
- The 10 per cent figure though is in fact not so much a limit as an aspiration. According to the latest HMRC figures, some £270 billion sits in adult Cash ISAs (figures to April 2018 – for the raw data from HMRC click here). So £27 billion of P2P inflow would be very welcome indeed.
