The latest addition to my family takes up more room in the car than expected, and the old car is dying more quickly than expected, so I want to buy a new car sooner than expected. To do this I took out a small loan, and shopping around for loans I found Zopa. The feature of their loans that attracted me was the ability to repay early without penalty.
But there is more to it than that. They are a peer to peer lender. Savers can save money with Zopa, and the money is divided into £10 chunks and spread between a large number of borrowers. I can visit a web page that shows a list of the people who have lent me money. For instance, I owe £20 to John Owen in Brighton. I get a cheaper loan, and they get higher returns on their savings than could be had from a conventional savings account.
Of course, though the credit reference checks are quite stringent, there are risks. The web site Money Saving Expert points out:
With normal UK savings, the Government-backed Financial Services Compensation Scheme promises it’d pay the first £85,000 per person, per financial institution if the institution goes kaput. Peer-to-peer lenders don’t have this.
Well, good! Peer to peer lending is about as Samizdata as it gets. Individuals are voluntarily lending their money to each other for mutual benefit, bearing the costs of their own risks. There is not even any fractional reserve banking to worry those who worry about such things. The interest rates are properly Austrian, being set by a market and not by the government. And the company called Zopa is making a profit doing the very valuable middleman job of dividing the labour by taking care of the paperwork and matching borrowers to lenders.
Zopa is a founder member of the Peer-to-Peer Financial Association, “a UK trade body set up primarily to ensure this innovative and fast growing sector maintains high minimum standards of protection for consumers and business customers”. A worthy idea: a voluntary membership organisation that enforces high standards among members thereby helping consumers decide who to trust.
On 24th October the Peer-to-Peer Financial Association issued a press release.
Christine Farnish, Chair of the Peer-to-Peer Financial Association (P2PFA) said:
“We welcome today’s consultation by the FCA on the new regulatory regime for peer to peer lending and crowd funding.”
“Peer-to-peer lenders have been pressing for regulation for some time and believe it is important that all firms entering this important new market behave responsibly, treat their customers fairly and manage their risks.”
So now they want to take all this beautiful voluntary activity and introduce state backed violence. And they think this is a good idea. I give up.