Peer-to-peer stakeholders welcomed the move to regulate alternative lending, as part of the wider consumer credit transfer in April 2014, seeing it as a positive step for the industry.
The Peer-to-Peer Finance Association said: “This news represents a watershed moment for peer-to-peer lending.
“The Peer-to-Peer Finance Association has provided clarity and protection for consumers and businesses but we have always strongly believed that introducing proportionate regulation was necessary to enable the sector to continue to flourish.
“We are committed to working closely with the government and the Financial Conduct Authority over the coming months to build the right framework for our future.”
Nick Moules, communications manager for Rebuilding Society, said that the firm had initiated dialogue about regulation with the Financial Services Authority as soon as it began trading.
He said: “Elevating the industry to regulated product status will build on the positive steps the industry has already taken to self-regulate and open the model up to the mainstream.
“It’s also a solution for the times. As the country’s economy strives to grow we believe increasing liquidity to businesses is vital while concern about the performance of pensions and savings means individuals are considering alternative forms of investment that offer better returns.”
The proposal was discussed by the House of Lords in November which described the industry as an “innovative sector”.
Chief executive of RateSetter.Com Rhydian Lewis added: “The government has recognised the importance of peer-to-peer finance for consumers and understood our potential to rival mainstream banking in the future.
“This vindicates our decision to work together as an industry, pursuing a voluntary code of self-regulation, and marks the next chapter for this exciting sector.”
The regulator’s mandate is to ensure regulated firms conduct themselves in the right manner and to offer appropriate protection to consumers.
Lewis added: “These are values which RateSetter has been committed to from day one. The regulator’s mandate is also to promote competition and the emergence of peer-to-peer offers precisely that. We are absolutely delighted by the Government’s endorsement and look forward to continuing to work with policy makers to develop a proportionate framework.”
The consultation period is expected to begin in January where the industry will be allowed to submit its opinion on what the framework should look like.