On 26th August, the FCA published a portfolio letter for P2P firms setting out four areas that the FCA has identified which carry the potential to cause harm for investors/lenders in the P2P sector. These includes;
- inaccurately pricing loans in the secondary markets and not taking into account the impact of Covid-19 on borrowers’ creditworthiness in pricing loans;
- unclear, unfair and misleading disclosures of loan performance during periods of loan forbearance and inadequate/inappropriate disclosures about the use of contingency funds;
- unclear platform fees, charges and priority over recoveries and;
- inadequate wind-down plans, which don’t include sufficient details about their triggers and liquidity monitoring.
Wind-down planning has cross-sectoral relevance for all financial service and product providers that have a subsisting contractual relationship with customers. The objective behind wind-down planning is to facilitate an orderly wind-down of a regulated firm in order to minimise the potential impact on customers and the relevant market in which the firm operates. Wind-down planning is evermore pertinent for regulated firms as the business uncertainties associated with the pandemic remain. We recommend that firms visit the FCA’s Wind-down Planning Guide in the FCA Handbook to review or create appropriate wind-down plans that evidence a credible strategy to ensure an orderly wind-down.