The concept of P2P lending
P2P lending is a mechanism of borrowing money between individuals through special online platforms.
The main point is that people can borrow money by setting their own terms and conditions without the involvement of banks, credit unions or micro financial institutions.
P2P lending is made possible by digital technology and takes place online. P2P-platform is a site-platform where borrowers search for funds and thanks to the absence of many unnecessary intermediaries, the cost of credit is much cheaper than in traditional banks. P2P platforms are also popular with investors.
In this article we will tell how to create a P2P platform and go through all the legal issues of launching such a platform in detail.
In today’s world the amount of P2P lending amounts to tens of billions of dollars, and every year this market is growing. Especially it concerns European and Asian markets of P2P-lending.
So which country to choose to create a P2P lending platform?
The United Kingdom
The regulator of P2P lending is the Financial Conduct Authority (FCA).
The minimum authorized capital is £ 50,000. Risks must be described for the customer, also terms and conditions, interest rates, marketing materials and information on the website must be fully transparent and not misleading.
In the UK, there is a financial ombudsman service which P2P platform investors can contact to make complaints. Borrowers are entitled to a cool-down period of 14 days from the time they take out a loan. During this period, they can opt out of the loan to pay a penalty/commission.
Note the exception: P2P platforms that operate on a tip or donation model do not require authorization from the FCA.
The regulator of P2P lending is the Bank of Lithuania. The minimum authorized capital is EUR 40,000. Considering our experience and the fact that the Bank of Lithuania is considered one of the most progressive and loyal regulators in the FinTech-sector, it is much easier and faster to obtain a license in Lithuania than in other jurisdictions.
It takes one month to obtain it. In the future it will be possible to resort to the possibility of passportization and work together with EMI or PSP licenses in other EU countries.
In March 2016 legislation was passed which obliges P2P lending platforms to obtain a license from EFSA (local financial market regulator). The license can be obtained in two forms: for a credit intermediary or a lender. But there is an exception: companies that operate on a tip or donation model do not require licensing.
The regulator of P2P lending is the Financial Supervisory Authority of Finland (FSA). The minimum authorized capital is EUR 50,000. Important feature of this jurisdiction is that any transactions with client’s funds must be conducted jointly with partner bank or payment system, or the company itself must obtain a PSP license.
There is no legislation which would regulate P2P lending in Germany. The Banking Act is the basis for all lending mechanisms. Consequently, P2P operators are obliged to work with partner banks.
Note that a similar regulatory regime is applied in France and Italy.
The regulator of P2P lending is the Securities Market Commission (CMVM). Two types of these platforms are distinguished: credit-based crowdfunding platforms and investment-based crowdfunding platforms. The minimum registered capital is EUR 50,000.
Required documents for registration of P2P platforms
Usually the regulator asks for the following documents:
This is a basic list of documents, but each jurisdiction has specifics that depends on the requirements of the local regulator.
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