Rules stymie lending plan

PEER-TO-PEER LENDING hopefuls are facing a fight against regulations that could limit the size of their loans and prevent them from expanding into mortgage lending.

New Zealand is unusual in not yet having legalised peer-to-peer (P2P) lending, where businesses provide what is in essence a matchmaking service, bringing together people who want to lend their money for a profit and people who want to borrow it.

In some countries, such as the United States and the United Kingdom, where bank deposit rates are very low, P2P lending has grown rapidly.

But proposals for regulating the nascent industry in New Zealand, where several P2P lenders are ready to launch, would limit the size of loans to $50,000, while limiting the amount any person could lend to $10,000 a year.

Online startup Nexx, which hopes to become one of the first P2P lenders, strongly argues against the caps proposed by by the Ministry of Business, Innovation and Employment, which also appears to regard P2P lending as unsecured, says founder Ben Milsom.

‘‘I’m not sure why they’re looking down that road,’’ he says. ‘‘No other jurisdiction has those limits, except in some states in the US.

‘‘We’ll be submitting strongly on those points. If there’s pushback, then I think we’ll argue for a tiered option that allows for some kind of investor accreditation or self-certification that they’re OK to exceed those $10,000 limits.’’

The ‘‘pessimistic’’ timeline for regulations to be in place so that P2P lenders like Nexx and Lendit can begin facilitating loans is the first quarter of 2014, he says.

That is too long and requires Nexx’s investors to be very patient, although they indicated their continued support at Nexx’s annual meeting just before Christmas.

Milsom is not alone in that view. John Walley, chief executive of the New Zealand Manufacturers and Exporters Association, is also founder of the Lendit P2P service, which was shut down after its launch in 2009.

Walley is frustrated that things are moving so slowly, and does not rule out launching again, now that the Government has indicated the likely substance of P2P regulations.

He attributes the slowness to several things, including the national psyche.

‘‘There is still a (small ‘‘c’’) conservative comfort in New Zealand which says, ‘Things are not wonderful, but they are not that bad. Do we really need to stir things up?’ ’’

P2P lending has the potential to put downwards pressure on the cost of personal and car loans, he says, adding that the banks are making far too much money.

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