P2P lending platform Ratesetter is to resign from the Peer-to-Peer Finance Association (P2PFA) according to multiple sources. The leading UK lender is close to obtaining full authorisation from the Financial Conduct Authority (FCA) but admits it cannot comply with the P2PFA's voluntary code of conduct on transparency.
We'll be sorry to see them leave their trade association. The P2PFA has done good work to champion a voluntary code of conduct between UK lending platforms, which we think embody good practices that others could emulate. So why does Ratesetter feels unable to comply any longer?
A month ago, we reported Ratesetter admitted it was in trouble from a series of loans it had made, But the platform solved the problem by taking equity stakes in the troubled businesses to protect its investment. And the loans arose out of Ratesetter;s involvement in wholesale lending, a controversial feature of the peer-to-peer sector, from which Ratesetter had decided to withdraw. So what is the transparency problem? It seems to Another Crowd that Ratesetter's dirty laundry is being washed in public.
Today, The Times makes the blunt assertion that Ratesetter has left the peer-to-peer lending industry's trade body after being accused of attempting to hide bad loans from investors. (A subscription is required)
"RateSetter hit an operational hurdle that culminated several million pounds worth of loans being taken over by the platform. This amount would have outstripped the Provision Fund, a reserve designed to shield investors from poorly performing loans."
Bridging and Commercial adds more detail. They quote a Ratesetter announcement:
“Membership requires adherence to the P2P Finance Association operating principles, including transparency. No customer has experienced any loss from our actions, but we recognise that our actions breached the principles of the Association.”
Responding to RateSetter’s announcement, the P2PFA stated: “We understand the reasons why RateSetter has withdrawn from P2PFA membership and respect their decision.”
It's sad, but we note that Ratesetter has been scrupulous in their adherence to the rules. In a finance industry where were too many traditional institutions don't flinch when faced with embarrassing evidence, we think this is more positive than negative.