As consumers become increasingly protected, with individual platforms required to put steps in place to really earn customer trust, the sector is expected to experience massive growth. Analysts at Liberum have predicted that the P2P industry in the UK could grow to £45 billion within the next decade, from just over £1 billion at present. And following regulation, we are extremely proud to have unveiled our new and improved Provision Fund. It is the largest in the industry at over £4m and no saver has lost a penny since RateSetter’s 2010 launch. A unique feat amongst the major P2P platforms.

1. REGULATION
A new dawn for P2P

2. 1
Introduction
2
5 key points of
FCA regulation
3
Your questions
answered
Contents
4
Final thoughts

3. Introduction
On 1 April 2014, the Financial Conduct Authority
(FCA) became the regulators of the P2P
lending industry.
This presentation aims to guide you through the
changes this move has brought about, and the
implications on you as a consumer.
Firstly, we will take you through the 5 key points
that are at the heart of the new regulation.

4. #1 - A P2P platform must keep customer money completely
separate from its own money
This is to comply with the FCA’s well-established Client
Money Rules.
This highlights the fundamental difference between saving
with a bank and saving through P2P; when you deposit your
money with a bank it becomes their money (with a promise
to pay it back to you) after which they are free to lend it out
to borrowers. With P2P, you are lending directly to the
borrower – with the platform making sure it all works
and is safe!
RateSetter has kept client money segregated from company
money since we started trading over three years ago, so we
are already fully compliant.
Read more at:
http://www.ratesetter.com/blog/1_Top_5_Key_Features_of_P2P_Regula
tion.htm

5. #2 - A P2P platform must have a minimum amount of money
in the bank to ensure it is solvent
The technical wording here is Minimum
Operating Capital.
This is very similar to the way a fund manager is
required to operate. P2P platforms will have to hold
a minimum amount based on a percentage of the
loans outstanding.
RateSetter is capitalised well beyond the limits set
and so, again, is already fully compliant.
Read more at:
http://www.ratesetter.com/blog/2_Top_5_Key_Features_of_P2P_R
egulation.htm

6. #3 - A P2P platform must conform to a host of
reporting requirements
This is a great way for the regulator to keep tabs on what is
going on and is a guiding discipline for the industry to make
sure its information and data is in good shape!
Being a data-led company, RateSetter already tracks,
measures and reports on all aspects of the business.
We are a big believer in transparency and a member of the
Open Data Institute (ODI). We worked closely with the ODI
in July 2013 to help produce an open data report on the P2P
industry in the UK.
Read more at:
http://www.ratesetter.com/blog/3_Top_5_Key_Features_of_P2P_Regula
tion.htm

7. #4 - P2P platforms will not restrict saver access through the
use of suitability tests
Arguably the most fundamental and encouraging element of
the new regulation is that the FCA is not restricting saver
access to P2P platforms by using such unwieldy things as
Appropriateness & Suitability Tests.
RateSetter believes that great rates should be available to all
and applaud this regulation. We have always been upfront
and honest about the risks of P2P lending and will continue
to provide information in a clear, understandable and
open manner.
We’ve always done this voluntarily, so are pleased that all
platforms will have to follow suit.
Read more at:
http://www.ratesetter.com/blog/4_Top_5_Key_Features_of_P2P_Regula
tion.htm

8. #5 - P2P platforms must have a contingency plan in place in
the event of the business model failing
A plan in case it all goes wrong. This is one of the key facets of
regulation; the platforms must have a plan to run down the loan
contracts in the event that they go under.
Ensuring every platform has a Fully Funded Run-Off Plan in place should
instil confidence in consumers. So if the worst case scenario should
happen, a detailed and fully funded plan is rolled out seamlessly to
ensure contracts are fulfilled.
RateSetter has set-up an FCA approved plan. We feel strongly this
responsibility should not be left in the hands of a third party with no
knowledge of the loans.
RateSetter’s Fully Funded Run-Off Plan has calculated the cost of running
down the loans and ensures there are more than sufficient funds to do
so effectively. The implementation would be fully funded, mainly
through income that comes from the loans and will deliver a consistent
level of service through-out the run-off.
Read more at:
http://www.ratesetter.com/blog/5_Top_5_Key_Features_of_P2P_Regula
tion.htm

9. OK – So that is the technical side
summarised. But what really
matters is how regulation impacts
on consumers.
How does it protect customers?

10. Q1 – Does regulation mean P2P lending is now
risk free?
No. P2P lending is not suddenly a risk free proposition. However, it is
certainly becoming safer. Risks are reduced but you should challenge
each platform to see how they protect your money.
To help you better assess P2P platforms before you deposit funds, take a
look at our checklist before investing.
Fortune favours the brave. But at RateSetter savers don’t need to be that
brave. Since launch in 2010, 100% of our 12,,000+ savers have received
every penny expected. It’s no guarantee but it is a record that gets
stronger every day. Our Provision Fund sets the standard in the
P2P sector.
We conducted a recent poll asking ‘will you put more money into P2P
after regulation?’ and 90% of savers said yes!
Read more at:
http://www.ratesetter.com/blog/P2P_Regulation_so_what.htm

11. Q2 – Is regulation good for consumers?
Borrowers will benefit from the mandatory 14 day cooling-
off period and a strict requirement for a detailed view on
disclosures – risks must be 100% clear!
Since day 1, RateSetter has put the customer first and
focused on their best interests. All good companies act
before the regulatory axe falls, and we have stayed ahead of
the curve.
RateSetter has also actively promoted the clear and fair
ruling. For example, we don’t do teasers and have
campaigned against their use. Most recently in January,
where we targeted ‘zombie accounts’ caused by teasers by
releasing actual zombies into London’s financial district!
Read more at:
http://www.ratesetter.com/blog/Is_regulation_good_for_consumers.ht
m
"Regulation will act as a
useful benchmark for the
P2P industry, but it is still
fundamental that you do
your research - don’t be
lulled into a false sense
of security.“
- Joe Levey, RateSetter Saver

12. Q3 – Does regulation hinder innovation?
Christopher Woolard, Director of Policy, Risk and Research at
the FCA, has said that their rules don’t limit innovation,
rather they protect consumers.
At RateSetter, we agree and welcome regulation. We believe
it will add trust to the industry and continue to nurture one
of the most innovative sectors in the world today. It is now
down to the platforms themselves to continue building
that trust.
And as one of the most innovative platforms, we are
confident we can continue to develop great ideas
for customers!
Read more at:
http://www.ratesetter.com/blog/Will_regulation_hinder_innovation_.ht
m

13. Q4 – Will regulation increase trustworthiness
in P2P?
P2P lending is the alternative solution to the traditional
financial institutions that brought the economy to such a
low and caused uncertainty for many consumers.
In the last three years P2P has done incredibly well amongst
those financially savvy consumers who have sensed the
opportunity before them to increase their savings.
But the industry must be rooted in consumer trust. So
RateSetter is behind the regulation of the industry, as it will
stop charlatans from setting up and impacting further on
consumer trust and bringing unfair negativity on the
P2P industry.
Read more at:
http://www.ratesetter.com/blog/Will_regulation_increase_trustworthin
ess_in_P2P_.htm

14. Final Thoughts
To the burning question – Will regulation help P2P become a credible
challenger to high street banks?
Undoubtedly yes – regulation provides a solid foundation, but the individual
platforms must now do more to protect consumers and earn their trust.
Our thoughts are backed by recent research for a Westminster Briefing,
where only 24% of respondents to a study didn’t see P2P as a credible
challenger to the banks.
At RateSetter, we have always put the customer at the heart of everything
we have done. We also recognise that individual platforms must now take
the baton from the FCA and really earn customer trust. We are therefore
extremely proud to have unveiled the new development to our Provision
Fund which already has a 100% track record.
The Provision Fund was the first of its type in the P2P industry in the UK to
help protect savers against the risk of borrower default. It is also the largest
and no saver has lost a penny since our 2010 launch. A unique feat amongst
the major P2P platforms.
To further strengthen the Fund, we have rolled out a series of
advancements. Read more about these advancements:
http://www.ratesetter.com/pages/provision_fund_brochure.html
*Westminster Briefing, The Future of Financial Services, 2014