Draft Financial Services And Markets Act 2000 (Carrying On Regulated Activities By Way Of Business) (Amendment) Order 2018

Jonathan Reynolds Excerpts

Wednesday 7th March 2018 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

As ever, it is a pleasure to see you in the Chair, Sir David. I thank the Minister for his introduction. I agree that peer-to-peer lending is important. It is an exciting and fast-developing segment of our financial services industry. I am pleased that the UK plays host to some of the firms that lead the market, which provides a helpful alternative to companies for which traditional bank lending, for whatever reason, is not the right fit.

We are dealing with something quite new, and it is fair to say that the market has developed rapidly. The Financial Conduct Authority has worked hard to keep pace with innovation as far as possible, such as through the introduction of the acclaimed regulatory sandbox, which has helped to incubate new financial services while prioritising consumer protection.

The one thing that, to be frank, confuses me about the Government’s motivations is why they believe now is the time to bring forward this deregulatory measure. It makes sense that borrowers should not be treated or regulated as financial services organisations, but our research reveals that that is not happening. Indeed, the stakeholders I consulted in the peer-to-peer lending sphere said they had not yet seen any evidence of it. I think the Minister’s words were that the legislation “could be” read in that way, but I do not believe it has been to date. I therefore simply ask him to provide further detail and clarity about the rationale in bringing the order forward. In particular, some concrete examples of when borrowers have been believed to be at risk of becoming regulated entities would be useful for the Committee.

The Opposition are supportive of creating a transparent, well-regulated environment for alternative finance to flourish. However, if we are to legislate to deregulate, we must be sure that we are doing so for the right, evidence-led reasons. I would be happy to receive that detail from the Minister either in writing or in his response.