LEGAL REQUIREMENTS TO DO PEER TO PEER LENDING

The process of lending money to individuals or companies through on-line platforms connecting lenders with borrowers is peer-to-peer lending, also abbreviated as P2P lending. Lenders can thus gain higher returns about the economic and investment products provided by banks because borrowers can borrow funds at a lower rate, even after the P2P loan. And they are therefore able to borrow money at lower rates, as well as to provide their services at a lower cost than conventional financial institutions.

The P2P lending platforms must obtain participants’ permission to access their credit information, and all credit information must be up to date, correct and full. You should be careful about P2P in this regard when inputting your details. In this respect, all hardware data in India must be stored and processed on the P2P lending platform. The lending platform is responsible for ensuring that no information obtained from the lenders or borrowers is made available without the permission of the participants to any third party.

Legal requirements

  1. Restrictions on creditor (Origination)

P2P platforms shall comply with the requirements of state-level banking and consumer finance. The same scrutiny will extend to new banks joining the state. Banking regulators need a range of P2P network licenses such as loans, credit brokerage/supervision, cash transfer and collection authorizations. For example, Indiana demands that the platforms apply for a permit from a collection agency. Mississippi needs a brokering loan license for platforms. Other states have no network license specifications and control the issuing bank only (Web Bank, Utah).

  1. Limits on marketing

P2P platforms would limit marketing to sophisticated, reputable investors, investment managers and those who certify their investments in P2P loans to no more than 10{d8a7e2a21a6dcd80c5fca3d913d0e3f45d7ecfe0671fdddb29523c1b67a1e351} of their investment portfolios. The FCA claims that this is an effort to shield unprofessional investors who are ignorant of the risks of P2P lending.

Both people have not accepted this move with the allegation of the regulator of ‘patronizing average people’ by Rhydian Lewis, CEO of RateSetter, one of the biggest P2P sites.

  1. Presentation of the MCOB standards

There is currently no domestic financing P2P market, but the FCA understands that some domestic finance lenders are moving into the domestic financial sector. You would not be able to have the same degree of insurance as a homeowner if you bought a conventional mortgage.

The conditions include the P2P loan to ensure that any lender can afford the amounts due under the contract and that the MCOB conditions are primarily met.

  1. Remedial grievance

Following its Board of Directors approved policy, P2P lending platforms shall set up a complaint correction mechanism to resolve the complaints by the lenders/borrowers within one month. The P2P lending platform shall also disclose on its website, that the participant may call the RBI Consumer Education and Security Department if the complaint is not satisfactorily resolved within the stated duration. The P2P lending platform shall also disclose on its website, that the participant may call the RBI Consumer Education and Security Department if the complaint is not satisfactorily resolved within the stated duration.