Peer-to-peer lending matches people who want loans with people who are potentially willing to fund those loans. The 'matching' is done via an intermediary - a peer-to-peer lending service.
What is a peer-to-peer lending service
Peer-to-peer lending is a type of financial market service covered by the FMC Act. The Act enables borrowers to raise up to $2million in any 12 month period, without having to issue an investment statement or prospectus (or a product disclosure statement from 1 December 2014). Some peer-to-peer lending services may restrict borrowers to smaller loans than the full $2million. Because borrowers will only get the funds they are seeking if there are people willing to lend it, there are no guarantees they will raise the money they are seeking to.
Why get a licence
With a licence, you can provide services to borrowers who want to offer debt securities without supplying a product disclosure statement (PDS). By using your licensed service these borrowers can rely on an exemption in the FMC Act that means they don't need a PDS, although they must still meet all their other legal obligations.
Licensed peer-to-peer service providers have a number of on-going obligations, in addition to the minimum standards and standard conditions set out in their licence. These obligations include notifying the FMA of certain events and providing us with information.
Licensees obligations include notifying the FMA of certain events and providing us with information. All notifications should be emailed to the FMA at email@example.com, noting the relevant obligation in the subject line of your email. You can notify us when a new director or senior manager is appointed by completing a notification form.
In your application, you'll need to demonstrate how you can meet the minimum standards and conditions for your licence - or ask us for a limit or variation using the forms below. This is very important because when a licence is granted, they contain conditions that support your licensee obligations. They include conditions imposed by the FMC Act, the regulations, and any conditions imposed by the FMA.
As a licensee, you will also have on-going obligations. For example, you must:
have a written client agreement with lenders
give disclosure statements to retail lenders
monitor your compliance, identify material changes of circumstances, and meet reporting obligations.
There will also be a number of other important obligations.
Annual peer-to-peer provider regulatory return
All licensed peer-to-peer lending provider is required to complete and submit an annual regulatory return. The return is a series of questions about your business and how your licensed service is used.
All licensees will need to submit their return to us by 30 August, for the 12 months to 30 June.
The information you provide us through the annual return helps us to:
better understand your business and the services you offer
ensure the information we have on your business is current
focus our monitoring activities more effectively. See more
Peer-to-peer obligations for borrowers
Normally if you want to borrow money direct from the public, the FMC Act requires you to issue a product disclosure statement.
You do not need to prepare these documents if you are using a licensed peer-to-peer lending provider. Instead, you will provide information about your loan request to your provider so they can present your request for investors to read.
Licensed providers are not obligated to accept you as a borrower. They will run some checks on you and if you've got a bad credit history they may decide they won't help you find money.
If you are accepted, you will become a client of the peer-to-peer lending service. The provider will ask you to sign a client agreement that details what you need to do so the provider can monitor and check you.
The service provider can charge for their services. See more
Financial reporting obligations
All FMC reporting entities must comply with the following:
Keep proper accounting records to assist with the preparation of compliant financial statements. Records must be kept in English and a copy must be kept in New Zealand.
Prepare financial statements for the group's operation. Financial statements must comply with generally accepted accounting practices in New Zealand.
Ensure that financial statements are audited by a licensed auditor or registered audit firm.
Lodge financial statements and the auditor’s report with the Companies Office within 4 months of the balance date. See more
Fair dealing obligations
The FMC Act sets out minimum compliance standards of behaviour for people operating in the financial markets.
Fair dealing in advertising and communications – crowdfunding and peer-to-peer lending
The fair dealing requirements apply to all aspects of licensed crowdfunding and peer-to-peer lending services. This guidance only focuses on communications made for the purpose of promoting, or informing customers about, an offer of financial products or financial services.
You must provide a written risk assessment of the money laundering and financing of terrorism activity you could expect in the course of running your business.
You are required to implement an anti-money laundering and countering financing of terrorism programme that includes procedures to detect, deter, manage and mitigate money laundering and the financing of terrorism.
You are required to appoint a compliance officer to administer and maintain your programme.
You are required to perform due diligence processes on your customers. This includes customer identification and verification of identity.
You are required to report suspicious transactions.
The FMA has wide powers to exempt persons or transactions from some financial markets law requirements. These powers enable us to remove rigidities in the law and ensure requirements for businesses are reasonable and cost-effective. Find out more about exemptions you can apply for under the FMC Act and current exemption notices.