ASIC has released an Information Sheet on Marketplace lending (peer-to-peer lending) products (INFO 213) to provide guidance for providers of marketplace lending products particularly products structured as a managed investment scheme. The guidance in the information sheet may also be relevant to marketplace lending providers that use other business models.

Marketplace lending generally describes an arrangement through which retail or wholesale investors invest money (seeking to earn a return) which is then lent to borrowers (consumers or businesses).Marketplace lending arrangements commonly involve the use of an online platform, such as a website, on which loan requests are made. The loan requests may then be matched against offers to invest.

The Information Sheet discusses key risks involved in providing marketplace lending products as well as the key obligations that may apply to marketplace lending business models and applications for relief that may be considered.

Under Australia’s financial services and credit laws, providers of marketplace lending products and related services will generally need to hold both an Australian financial services (AFS) licence and an Australian credit licence (if the loans made through the platform are consumer loans).

If the marketplace lending product is offered to investors who are retail clients using a managed investment scheme structure, the operator (i.e. the responsible entity) of the scheme will need to register the scheme with ASIC. The responsible entity of a registered scheme must be a public company that holds an AFS licence authorising it to operate the scheme and any other financial services provided in operating the scheme.

ASIC recommends that as a matter of good practice marketplace lending providers may wish to consider one or more of the following strategies to assist investors in understanding marketplace lending products and relevant risks:

• refer investors to the marketplace lending information available on ASIC’s MoneySmart website;
• provide investors with an appropriately designed risk warning statement;
• provide investors with an optional ‘knowledge test for investors’ to assess their understanding of the product before they invest
• provide information on the website about the policies and procedures for managing the selection of borrowers and ongoing monitoring of loans policies (without disclosing commercially-sensitive information) and aggregated information about the loan book such as interest rates, loan amounts, term of the loans and whether loans are secured or unsecured.

ASIC also recommends lenders consider its Report 429 Cyber resilience: Health check (REP 429) on managing online fraud and other cyber risks as well as its recent Report 468.

Report 468 calls on the wider financial services sector to recognise the growing threat to cyber security and to refine systems and processes to prevent and address critical issues.

The report recommends that senior management of organisations to closely manage cyber risk from both internal and third-party sources, establish robust collaboration and information-sharing networks to access the best defensive intelligence and technology, and implement thorough cyber awareness training programs.