With new regulation set to come into effect on 9 December, stakeholders have hailed the change as a “watershed moment” for the peer-to-peer (P2P) lending industry.

The rules raise standards in risk management, governance, disclosure, marketing and wind-down planning, putting the regulation of P2P on a par with other mainstream financial sectors.

Rhydian Lewis, chief executive of P2P platform RateSetter, said: “We will look back on this as a watershed moment for our industry – the moment that peer-to-peer investing came of age as an asset class, competing against other mainstream investment options and the banks as an attractive way to put money to work.”

The regulations place a limit on investments in P2P agreements for retail customers new to the sector of 10 per cent of investable assets, while platforms must assess investors’ knowledge and experience of P2P investments, where no advice has been given to them.

“For first-time P2P investors, 10 per cent is a sensible place to start and once you are experienced you can invest more,” said Lewis. “This is exactly what we have seen over the last 10 years, with people dipping their toe in and then growing as they see the value – the limit will become a target, encouraging every investor to think about diversifying some of their money into P2P.

The collapses of Collateral, Lendy and Funding Secure this year alone have brought the reputation of the P2P lending sector into question. The market was born out of the 2008 financial crash in 2008, aimed at providing fair finance, especially to those most vulnerable in society to whom the large banks would not lend to.

It has grown into a £6.1 billion industry since then, offering loans to consumers and small businesses, along with attractive interest rates to investors.

Roger Gewolb, founder and executive chairman of FairMoney, commented, “We believe that the FCA has been put in the position of upholding and perpetrating the myth that was started a decade ago that people who put money into peer-to-peer lending platforms instead of banks are investors and not depositors.

“P2P lending platforms are simply unlicensed deposit takers and it is an absolute fiction to consider that they are taking in investments, or that the people putting their money into them regard them as investments.”

Just this week, one of the largest P2P platforms Zopa, received further financial backing to help obtain its own banking licence.

Gewolb said: “I do not for one moment suggest that all P2P lending platforms should do this, only that the Bank of England exerts some degree at least of proper independent lending supervision.”

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