31 May, 2016

Zopa, RateSetter and Funding Circle Miss ISA Deadline

Zopa announced in a statement to its investors this morning that the peer-to-peer provider will not be able to offer the Innovative Finance ISA (IFISA) from the 6th of April. Zopa will only be able to offer the IFISA once they have gained full regulatory permissions.

It may come as a surprise that Zopa does not hold full FCA authorisation, however, this is common amongst peer-to-peer lenders. There are 44 firms operating under interim permissions, while the FCA waits to decide whether to authorise them fully. Until these firms receive full authorisation they will not be able to offer the Innovative Finance ISA, but they can continue carrying out their normal business activities. Once a firm has gained authorisation they will also have to submit an application to the HMRC to gain ISA Plan Manager status. The process of gaining ISA manager status from the FCA generally takes two weeks.

The FCA currently has a backlog of peer-to-peer providers awaiting full authorisation so the usual 12 month authorisation process may take longer. This backlog is due to 'high volumes of applications'. Zopa applied for full authorisation in September 2015, while RateSetter applied in October 2015 so it is unlikely that both these firms will be able to offer an ISA product until after September 2016.

This begs the question, which firms have authorisation and who will be offering the Innovative Finance ISA from the 6th of April? There are eight firms with full authorisation which include Funding Tree, Crowdstacker and Crowd2Fund, however none of the larger, better known firms have full authorisation.

Rebecca Stiasny, the Head of PR and Comms provided the following statement to Orca Money:

The Crowdstacker IFISA is open for business and investors can open an account online or by post.  Current investment opportunities on the platform which can be held in the ISA are offering up to 6.8% interest. Crowdstacker only features businesses looking to raise funds who can demonstrate they are financially stable and reliable by going through an in-depth due diligence process.  And all loans are structured individually so that appropriate safeguards such as first charge over assets or parent company guarantees are put in place to assist investors in the unlikely event of a default.

Yesterday, Abundance Generation announced that it has gained ISA approval from the HMRC allowing it to offer the Innovative Finance ISA. This approval succeeds the full FCA authorisation the lending platform received prior to HMRC approval.

As Funding Circle, Ratesetter and the majority of the other major P2P providers operate under interim permissions similar to Zopa they will also miss the Innovate Finance ISA deadline on the 6th of April.

This leaves the platforms who have managed to gain Full FCA authorisation open to take the market share of investment from launch. Crowdstacker, Crowd2Fund and Funding Tree are set to offer an Innovative Finance ISA from the 6th of April.

It is disappointing for investors in the large P2P platforms, however, overall this may be positive. Careful regulation is important to protect you, the investor, so it's likely a good thing that the regulator isn't rushing the application process.