As of April 2014 Zopa is now regulated by the Financial Conduct Authority (FCA). Zopa has been lobbying for regulation for a number of years and was a founding member of the trade body P2PFA which has been successful in securing regulation for peer-to-peer lending.
We welcome the new rules as they ensure all peer-to-peer lenders continue to operate responsibly and have their customers’ interests and protection as their main focus.
Most of the FCA regulation consists of policies and procedures that Zopa already adheres to, but here is an overview of key points for new customers.
1. Keep client money separate – Zopa keeps client funds (the money you put in to lend or repay on your loan) separate from Zopa’s own revenue and capital. Your money is held in a third party RBS trust account – this has been in place since Zopa was launched over nine years ago.
2. Protections in the event of failure – Zopa is a stable business with sufficient capital. However we still have robust policies to manage the continued collection of loan repayments for savers should Zopa fail. Remember, with peer-to-peer lending the legally binding contract is between the saver who is lending and the borrower rather than with Zopa itself. This means the loan contract would still stand in the unlikely event that Zopa ceases to exist. We also ensure that the fees related to those contracts will cover the costs of administering them, e.g. collecting borrower repayments and crediting lender accounts.
3. Prudential standards – P2P lenders must hold a set level of capital depending on the outstanding value of their existing loan book to withstand any financial shocks in the future. Zopa comfortably exceeds the minimum requirements set out by the FCA.
The new rules include having;
- 0.2% of the first £50 million of total loans outstanding;
- 0.15% of the next £200m of total loans outstanding;
- 0.1% of the next £250m of total value loans outstanding; and
- 0.05% of any remaining balance of total loans outstanding above £500m.
4. Clearly explain the risks and tax obligations involved - The FCA wants to ensure that every customer understands peer-to-peer lending and the risks involved in this activity. On the Zopa site all our customers can find a clear explanation of the risk involved on our Lending Risks page. They can also find information on default rates and how we credit check borrowers, the Safeguard fund and how it works as well as how we communicate and follow up with borrowers who have missed a payment. The returns on our site for savers lending money are quoted after fee and income tax must be paid on interest earned, as with other income and savings products. All savers are provided with an annual statement at the end of the tax year to make the process of declaring tax simpler.
5. 14 day cooling off period for borrowers – With Zopa, borrowers who have taken a loan have a 14 day period to change their mind, cancel the loan agreement and return the money. A policy Zopa has always had in place since we launched.
We believe FCA regulation gives UK consumers the reassurance and confirmation that they are dealing with a well-run organisation and can bring the benefits of Zopa’s better rates to a much wider audience of savers and borrowers.
If you have any questions you can as always call our customer team on 020 7580 6060