FMA issues New Zealand’s first licence for peer-to-peer lending services
The Financial Markets Authority (FMA) has issued its first peer-to-peer lending service licence. Auckland-based Harmoney is the first provider of this new financial service, under the provisions of the Financial Markets Conduct Act 2013.
“This is a new service for New Zealand that brings new opportunities for lenders and borrowers. Peer-to-peer lending has already proved popular in Europe and US, and we’ve been able to build on that experience,” said Elaine Campbell, FMA’s Director of Compliance.
Licensing peer-to-peer lending services forms part of FMA’s brief to facilitate new capital-raising opportunities in New Zealand. It is also part of the Government’s business growth agenda.
“FMA’s role is to regulate the companies providing peer-to-peer lending services. The service has great potential but lenders should also realise the risks are greater than putting money in a bank. Lenders can lose money or not get the interest they expect if borrowers fail to repay the loans.”
Peer-to-peer lending involves an intermediary, the peer-to-peer lending service, bringing borrowers and lenders together, and charging a fee for the service. Lenders and borrowers can find out more information on FMA’s website.
“To meet the required standards, service providers must provide clear disclosure for lenders and have fair, orderly and transparent processes around how they deliver their service. Applicants must also demonstrate they’ll meet minimum standards of conduct. We are available during the process to help potential licensees understand their obligations,” said Ms Campbell.
“Harmoney has shown itself capable of delivering the service and demonstrated how it intends to comply with its obligations as a licensee.”
Under the regulations, borrowers are limited to raising no more than $2 million in any 12-month period through peer-to-peer lending services. This limit applies to both business and consumer borrowers – although individual service providers may impose lower limits on the amount that may be borrowed. The regulations don’t impose any limits on the amount lenders can lend, although some service providers may impose limits. Lenders should remember they may not be able to withdraw their money at short notice.
FMA’s role involves both licensing peer-to-peer lending services and monitoring their ongoing compliance with their legal obligations and licence conditions.
Borrowers using the service will not be individually checked by FMA, but the Financial Markets Conduct Act 2013 prohibits borrowers from making false or misleading statements, or unsubstantiated claims. Peer-to-peer lending services must exclude borrowers from using the service if they have reason to believe the borrower is in breach of these obligations.
The peer-to-peer lending service must be a member of a dispute resolution scheme – which customers can use at no cost – and must also have a complaints handling process.