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UK regulator warns peer-to-peer lenders against noncompliance

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UK regulator warns peer-to-peer lenders against noncompliance

The U.K. Financial Conduct Authority has written letters to executives of several peer-to-peer lenders, warning that it would "intervene strongly and rapidly" where it sees evidence of noncompliance, the Financial Times reported.

It comes ahead of the implementation of tougher regulations for the sector in December and followed the collapse of Lendy Ltd. in May. The regulator was also criticized recently on how it handled the failure of Collateral (UK) Ltd. in 2018.

In July, the FCA launched a consultation on the proposed stricter measures, which laid out detailed requirements on the assessment of borrowers' credit risk and investor return, the pricing of loans as well as on compliance and marketing restrictions.

The regulator also said it is engaged with several companies that made changes to their business models without notifying it and that its prudential specialists will determine whether the firms have adequate financial resources for their operations. The FCA mentioned the property lending area in its letters as one where it had particular concerns and said it is probing the quality of business on several different platforms in the country.

Meanwhile, Chairman Paul Smee of the Peer-to-Peer Finance Association, which represents the largest peer-to-peer lenders in Britain, said the sector was a source of financing for small businesses, effectively making it an important contributor to the U.K. economy, the FT said.

"I think some of the comments of the regulator are as though we're a one-size-fits-all sector when clearly we're not," Smee reportedly said, adding that the sort of business its lenders are doing is "sensible and very transparent."