The Financial Conduct Authority (FCA) has sent a letter to 31 peer-to-peer (P2P) lender platforms informing them that they may have to wait longer than initially estimated for full authorisation to participate in the new Innovative Finance ISA (IFISA).

The delay is connected to changes proposed by the Treasury on a number of issues: changes to secondary trading platforms, which the Treasury says possess “similar characteristics to collective investment schemes”; changes to client money regulations to ensure “greater protection for P2P investors”; and sharpening the distinction between Collective Investment Schemes (CIS) and P2P lending, which the Treasury handled in late 2015.

On that occasion, they said that if a site was approved by the FCA as an electronic lending platform, then it was by definition a P2P lender and not a CIS. This appears to be an over-simplistic distinction, however.

The memo warns P2P lenders, the main drivers of the UK’s alternative finance industry, that “high application volumes” have made it impossible for the FCA to allot case officers to applications as quickly as it would have preferred.

The desire to improve protection for investors is related to the fact that P2P platforms are not covered by the Financial Services Compensation Scheme. However, one platform, Unbolted, has abolished investor and borrower risk by means of a unique secured assed loan offering, in which a borrower’s high value possession is collateralised as security for the loan. Should borrowers be unable to settle, the worst that can happen is their asset is sold at auction to recover the outstanding sum.