What Is The Peer-to-Peer Lending Association?
Founded in 2011, the Peer-to-Peer Lending Association is the UK’s industry body for peer-to-peer finance providers. Created to ensure proper levels of protection for service users, and high standards of conduct, the association contains 8 members which represent the most well-known and successful peer-to-peer lending companies in the UK. These members are: Zopa, Ratesetter, Wellesley, Funding Circle, ThinCats, Madiston LendLoanInvest, MarketInvoice, LendInvest, and LendingWorks.
Recognising the need to provide formalised levels of protection for those placing their money into these increasingly popular lending systems, those companies have agreed to adhere to a set of principles set out by the association.
There are a number of rules stipulated which members are obliged to follow. The ones most important for those looking to invest in their systems require companies to:
- Maintain minimum operating capital requirements, to ensure the stability of their service.
- Keep the funds of service users to separate from company money.
- Lend responsibly, and manage credit risk.
- Provide further safeguards by using appropriate anti-money laundering and anti-fraud measures.
- Provide clear rules for using the service, and a transparent explanation of charges and fees, likely default rates, terms and conditions, and likely returns.
- Maintain a strong, secure, and reliable IT system to prevent security breaches, and make sure profits don’t suffer as a result of technological failures.
- Ensure that, should a platform cease to operate, customer contracts will be organised effectively.
These standards represent an important step forward for the booming business of peer-to-peer lending. While placing money into these systems still carries some risk, the fact that providers have gone out of their way to ensure lenders and borrowers are suitably protected, and aware of potential problems, provides a large degree of relief. If you previously thought that these financing services might not have your best interests at heart, these regulations should prompt you to revise that opinion.
Of course, these systems are still not fully regulated. However, the collaboration of separate companies to produce a uniform set of criteria to ensure the responsible facilitation of peer-to-peer financing forms an important foundation for subsequent developments. The Peer-to-Peer Lending Association’s formation was driven by the incredible growth of the industry. As those platforms continue to evolve, standards will do so too, making peer-to-peer lending a safer option, year after year.
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