p2p news

on the rebuildingsociety.com blog

07th Mar, 2016

P2P Weekly: The latest on China, and other news

“China jails 24 after 230,000 investors defrauded,” via Financial Times

Perpetrators of a massive scam that robbed primarily retail investors of $1.5 billion have received jail time. The Guangdong Bangjia Leasing Co. has spurred concerns about the limited regulation of China’s online lending industry — recently, P2P lender Ezubao was embroiled in scandal when 21 of its officials were arrested for fraud.

“Chinese Peer to Peer Lending Industry Does Not Need More Rules,” via Crowdfund Insider

Enforcing existing laws is more likely to solve China’s fraud problem than adding new ones, says one expert. Spencer Li says: “There are sufficient laws and policies currently in place that allow the government to investigate and prosecute fraud cases such as Ezubao, but the lack of vigilant enforcement is the reason similar schemes continue to operate.”

“‘I’m happy to accept a higher risk for a higher return’: How peer-to-peer Isas lend edge to investing,” via This Is Money

A comprehensive look at the forthcoming Innovative Finance ISA and how it will benefit lenders plugged into the P2P market.

Dynamic Pricing in Alternative and P2P Lending” via The Financial Brand

“Our prediction is that alt lenders will start to offer new, non-lending products. If so, then the door to dynamic pricing swings ever wider and we will see bundled offerings that can be relationship priced.”


15th Feb, 2016

P2P Weekly: Industry Responds

The biggest news in the UK P2P lending world this week was negative comments from Adair Turner about the P2P industry.

Turner is the former chairman of the Financial Services Authority, the predecessor of the FCA. Turner told the BBC, “The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses.” Of course, P2P experts were quick to set him straight. Christine Farnish published her thoughts, writing “All members of the P2PFA operate to high standards of transparency and business conduct…All members of the P2PFA operate to high standards of transparency and business conduct…I challenge anyone to find this level of transparency in any other part of the financial services market.”

Other P2P leaders sounded off too: “The peer-to-peer industry is both broad and diverse, and to paint it with a single brush stroke as dangerous is ultimately unhelpful for consumers,” said Landbay CEO John Goodall.

In other news:

“Credit unions beginning to embrace fintech: ‘The way Canadians use financial services is rapidly changing,” via Financial Post

British Columbia’s First West Credit Union and Vancouver-based Grow have formed a new alliance designed to serve B.C. residents. And an Ontario credit union has announced plans to offer unsecured lines of credit through its own online platform. Financial leaders agree that the way Canadians use credit is changing, and companies are working hard to adapt.

“P2P lending: Four predictions for 2016,” via City A.M.

One P2P lending executive offers some insight into the coming year. As entrants to the industry rise, so may defaults, he writes, and the Innovative Finance ISA will continue to be front and center of the industry’s development.


25th Jan, 2016

P2P Weekly: A Look at the Evolving Lending Market, and Other News

“The Evolving Nature Of P2P Lending Marketplaces,” TechCrunch

The world of P2P lending continues to adapt and grow, with bigger investors and even banks getting in on the action. This article from TechCrunch takes a broad look and offers feasible predictions for the future.

“The sharing economy probably means much less inequality, not more,” The Telegraph

Fintech and crowdsharing markets could lead to a new economic structure — and perhaps a much more horizontally distributed one.

“Taking flight: The allure and the peril of Chinese fintech companies,” The Economist

The Economist breaks down the Chinese P2P market, which is one of the fastest growing and most fraught in the world. Nearly 1/3 of companies have had major problems, so the Chinese government is rolling out new regulations. Despite high risk, the market appeals to investors around the world who want to get in on the ground floor of an exploding market that is quickly expanding its reach internationally.

“Regulations Galore Part II: Peer to Peer Lending in China,” Crowdfund Insider

A careful look at the aforementioned regulations on Chinese lending.

“FCA Publishes Consultation on Loan Based Crowdfunding. Agency Seeks to Simplify Client Money Requirements,” Crowdfund Insider

“According to the FCA, presently an investors money held in relation to peer to peer loans must be segregated from the firms own money and any other assets. The regulator agency understands that some debt based platforms find this process burdensome as many P2P lenders have not developed systems to easily segregate funds between P2P or B2B lending agreements. The FCA is proposing to allow firms to elect to to hold both kinds under CASS 7, if they wish to do so. Firms may then segregate P2P and B2B monies together, but separately from the firms’ money, without breaching CASS 7.”


07th Jan, 2016

Tax and Relief on P2P lending

Lets face it, HRMC have been pretty kind to us P2P platforms and lenders…

Legally, we could have been made to withhold tax on interest earnings at 20%. Lack of enforcement has been an indirect subsidy as it has allowed lenders to compound their gross earnings. P2P lenders are expected to declare their earnings on their self assessment forms, due imminently. Whereas platforms are required to submit an Other Interest report so that treasury are informed about who earns what.

The newly regulated P2P lending industry is growing up and the government is helping.

Things will change from 6th April 2016…

The UK government may offer relief to P2P lenders for irrecoverable loans. So lenders can use next year’s tax deductions towards current bad debt relief, allowing you to substitute one deduction for another. Hurray!

Interim rules have recently been published by Treasury, but will change once formalised. We’ll confirm once published, but we have an idea of what’s likely to happen. We’re expecting that platforms will need to deduct 20% of interest earnings as received from lenders. We will change the ‘Fees’ tile on the dashboard to ‘Deductions’ and show the detail on the pop-up.

The IF-ISA excludes ‘Wrapped’ microloans from taxation

So lenders without any taxable income cannot use bad debt relief. Unless they use more than one platform, in which case taxes accrued in one platform may offset losses from another.

We’ll have more info on the IF-ISA very soon.

rebuildingsociety CEO Daniel Rajkumar says:

“The Crown is sharing in some of the risk of lending to SME’s. Hopefully this will manifest itself with a widening of risk appetite and further support for the productive SME economy.

Equity crowdfunding enjoys great relief through EIS & SEIS, so its great to see similar incentives applied to credit based lending.”

It’s bitter-sweet

They say that the only things that are certain are death and taxes… We knew this was coming, so we’re grateful for the:

– all of which soften the pain.

Net earnings may not reduce

With gross yields near 15%, a 20% tax will clip yields to 12%, that’s an overall deduction of 3%. So on a portfolio of £100k invested, £3k which would be taxed can go towards bad debt instead. Many lenders without bad debt will have an allowance that can be traded for non-performing loans.

Total interest pay-outs are expected to exceed £1.5m for next tax period across all lenders, at 20% this would net the Crown circa £300k. This is about the amount we have in defaults, we are expecting to recover £100k, but defaults will rise as some businesses fail. If lenders are able to maintain losses below 3% of your portfolio (and yields at 15%) then you’ll suffer no more loss from bad debt, than you would from taxation.

Its important to re-iterate that decisions on interest earnings taxation is still pending, but we believe that from April 2017, platforms are likely to have to deduct 20% from most lenders (depending on their tax bracket).

Risk appetite…

We’re working on a ‘non-performing loans’ or ‘tertiary market’ where risk adverse lenders can sell underperforming loans however they wish and optimistic buyers may find a deal. More on that at the lender’s evening next Thursday.

Hope to see you there.

Photo credit to: Kadellar


04th Jan, 2016

P2P Weekly: Lending Future is Bright in China, and Other Stories

“China Lays Out Rules for Peer-to-Peer Lending Platforms,”
Wall Street Journal

The China Banking Regulatory Commission has released rules for the P2P lending industry and is seeking public comment. Clearer regulations for the more than 2,500 P2P lending operations in China have been in the works for a while, and 2016 should be a big year for the industry in that country.

“Report: China P2P Lending Topped $150 Billion in 2015,” Crowdfund Insider

The P2P lending industry in China generated more than £100 billion in 2015, according to Chinese news reports. This indicates a high level of interest from the public in this industry, since P2P lending gets almost no institutional money in the country.

“Peer to peer lending is set to explode,” Business Insider

Writes John Mauldin: “I’ve been a fan of private credit for a long time. Recently, I have once again been exploring the private-credit world, and it seems this market is growing faster than I had thought.”

“RBI plans guidelines for peer-to-peer lending,”
The Economic Times

The Reserve Bank Of India plans to develop guidelines to regulate the burgeoning P2P industry.

“They should be regulated under the State Money Lenders Act,” said Raman Agarwal, chairman of Finance Industry Development Council. “On these platforms, lenders are individuals and State Money Lenders Act applies to individuals, and not entities. In this case, individual is not an individual lender but a camouflaged lender.”

“Funding Circle passes £1bn lending milestone,”
The Guardian

Funding Circle surpassed £1 billion lent in 2015 and is on track to lend a further £1 billion in 2016.


14th Dec, 2015

P2P Weekly: A Closer Look at the Innovative Finance ISA

“Will the Innovative Finance ISA Allow Only a Few P2P Lenders to Participate?,” Crowdfund Insider

Deeper analysis of the Innovative Finance ISA indicates that only fully regulated P2P lenders can participate in the innovative ISAs. You can see the draft documents at the link.

“More closures seen among Chinese peer-to-peer lenders as new rules loom,” Reuters

Ezubao, the largest P2P lender in China based on lending figures, is being investigated for potentially illegal activity. So far this year, 824 lenders have shuttered.

“The Evolution Of Fintech,” Forbes

Forbes offers a useful summary of the fintech industry’s history. This is the first of two pieces.


30th Nov, 2015

P2P Weekly: FinTech Growth

“Banking facing ‘Uber moment’, says former Barclays boss,” The Guardian

Technology continues to strengthen new banks and alternative finance, while traditional banks are at risk of falling behind, said Anthony Jenkins to Reuters. Jenkins was ousted from Barclays in July.

“Chinese Online Lending Startup Dianrong To Expand Into South Korea,” Wall Street Journal

One of China’s biggest peer-to-peer lenders will partner with a Seoul-based conglomerate to bring the Chinese company’s technology to South Korea’s financial industry.

“Scammers are trying to extort the customers of hacked crowdfunding site Patreon,” Business Insider UK

Patreon users exposed in a September hack are now being extorted by scammers who claim to have extensive data on those users. Patreon executives have urged users to ignore the messages.

“China Report: Bank Executives are Fleeing to FinTech Companies,” Crowdfund Insider

Several executives of high profile Chinese banks have turned to jobs in fintech after salary caps in the banking industry made it less attractive.


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