Lesson 2.2: Understanding the FCA's Regulatory Framework for P2P Lending
Introduction
Welcome to Lesson 2.2: "Understanding the FCA's Regulatory Framework for P2P Lending." In this lesson, we will explore the regulatory framework governing P2P lending platforms under the Financial Conduct Authority (FCA). We will cover key regulations and requirements, the impact of the Financial Services and Markets Act 2000 (FSMA), and the role of the General Data Protection Regulation (GDPR) in this context. Additionally, we will reference relevant sections of the FCA Handbook that outline the regulatory requirements for P2P lending.
Learning Objectives
- Understand the key regulatory requirements for P2P lending platforms under the FCA.
- Recognise the role of the Financial Services and Markets Act 2000 (FSMA) in shaping FCA regulations.
- Understand the impact of the General Data Protection Regulation (GDPR) on FCA-regulated firms.
- Explore the relevant FCA Handbook sections for P2P lending platforms.
1. Key Regulatory Requirements for P2P Lending
Overview of FCA Regulations:
The FCA regulates P2P lending platforms to ensure consumer protection, market integrity, and fair competition. The key regulatory requirements for P2P lending platforms are outlined in the FCA Handbook.
Relevant FCA Handbook Sections:
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CONC (Consumer Credit sourcebook): Part of the FCA Handbook that includes rules and guidance for consumer credit firms, including P2P lending platforms. Specific sections include:
- CONC 2.5 – Conduct of Business: Provides requirements for fair treatment of consumers and clear disclosure of information.
- CONC 5.3 – Communications with Customers: Covers requirements for advertising and financial promotions.
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PERG (Perimeter Guidance manual): Offers guidance on the regulatory perimeter, helping firms determine whether they need FCA authorisation. Key sections include:
- PERG 2.7 – Consumer Credit: Provides guidance on the application of FCA rules to consumer credit activities, including P2P lending.
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CASS (Client Assets sourcebook): Provides rules for the safeguarding of client money and assets. Key sections include:
- CASS 7 – Client Money: Outlines requirements for the segregation and protection of client money.
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DISP (Dispute Resolution: Complaints): Outlines requirements for handling complaints. Key sections include:
- DISP 1 – Dispute Resolution: Details procedures for dealing with complaints from consumers.
Financial Services and Markets Act 2000 (FSMA):
- Overview: FSMA 2000 establishes the legal framework for financial regulation in the UK, granting the FCA its powers and setting out its objectives.
- Relevance to P2P Lending: FSMA provides the legal foundation for the FCA's regulation of P2P lending platforms, including the authority to create rules, supervise firms, and enforce compliance. FSMA mandates that the FCA’s actions align with its statutory objectives.
Relevant FSMA Provisions:
- Section 1B: Sets out the FCA’s operational objectives and regulatory principles.
- Section 55B: Grants the FCA the power to authorise firms and supervise compliance.