Australian Marketplace Lending Update
In a recent report on licensing applications the Australian Securities and Investment Commission (ASIC) revealed that it has granted 7 Australian financial services licences (AFSL) and 3 Australian credit licences to marketplace lenders between January and June 2016. A further 3 AFSL applications are currently being considered. Previously, 6 licenses were granted between 1 July 2015 and 31 December 2015. This indicates that the number of entrants to the Australian market continues to grow.
Unlike other jurisdictions such as New Zealand, Australia does not have specific marketplace lending legislation. Marketplace lenders have had to adapt to fit within the existing financial services framework. There are a number of business models that can be used to facilitate marketplace lending.
However, managed investment schemes are most commonly used and to operate a managed investment scheme you need an AFSL. Under such arrangements lenders invest in the scheme and choose which loan their investment will be allocated to. The scheme then lends that money to the borrower directly or through another lending entity.
Marketplace loans can also be caught by the consumer credit regime and the lending entity will require an Australian Credit Licence if the borrower is a natural person and the purpose of the loan is predominately personal, household or domestic use or if it involves residential property.
The UK Financial Conduct Authority has recently announced plans to change the regulations for marketplace lenders following its review of the UK’s more mature loan based and investment based crowdfunding market last year. ASIC is undertaking a voluntary survey of marketplace lenders in Australia however a full review of sector has not been announced.