'Car Crash' pitch on tonight's Dragons Den

artyboy

Not sure who was watching, but there was just a an awful pitch on DD for a sort of 'crowdlending' fintech called justlend.co 

Now leaving aside that 2 of the dragons ended up offering, it's got me thinking - I've looked at the website and there is nothing to suggest they are FCA/PRA regulated, so how does this escape being classed as some sort of financial intermediary business?

As a side note, and it's hard to unpick, but they appear to be using another (regulated) French fintech to provide their payment processing and financial crime checks. Post-Brexit, is that even still allowed to the UK market?

I have no dog in this race per se, just a nagging feeling that this looks dodgy as heck, and that's before you even get into the ethical principles behind the business model.

Thoughts?

DullGreyGuy

If you think they are an intermediary why do you think they would be PRA regulated? PRA covers solvency of companies to pay out to customers so covers banks and insurers etc not intermediaries or lenders

If you look at their much larger peers like crowdfunder they are equally not FCA registered. My guess, and I am not an expert in this, is that they proclaim to be a non-advisory market place where the actual lenders are private individuals. Certainly private individuals lending is excluded from regulation under FSMA

Most start-ups dont develop everything from the ground up, most buy in various services from. third parties. Since Brexit companies have been able to have temporary passporting rules to prevent collapse. Look at PayPal.co.uk and it is still domiciled in Luxembourg (though some of their secondary services are now via their UK entity) 

Band7

what's the URL?

And is it actually Savings and/or Investments?

kaMelo

justlend.co

Not savings or investments, it's basically a way of lending money to family and friends in need with official documentation and repayment plans. What could possibly go wrong?

Band7

What a racket.

Certainly way off topic for the Savings and Investment Board, too.

cymruchris

I'll look forward to seeing their trustpilot reviews in a few months....

There's obviously not a criminal mind anywhere in the UK population that would want to take advantage of people by posting up a well-meaning campaign and then running off with the money.

masonic

It is offering payment services through partner company Lemonway (registered in France and with temporary FCA permissions to execute payment transactions). The firms do not and cannot hold or control client money, they just facilitate payments between lenders and borrowers. This falls under the Payment Services Directive, and EU firms can continue activities they were engaged in when the UK was still within the EU. Lemonway has been providing these services in the UK since 2013.

DullGreyGuy

cymruchris said:

I'll look forward to seeing their trustpilot reviews in a few months....

There's obviously not a criminal mind anywhere in the UK population that would want to take advantage of people by posting up a well-meaning campaign and then running off with the money.

Same as all other peer lending and crowdfunding sites... GoFundMe has someone raising £100,000 for cancer treatment in Japan that they say isnt available on the NHS in the UK. Not saying its not a genuine case, and I hope the treatment works for them, but for the majority of the 4,700 that have made donations so far they really dont know if the person in the picture in a hospital gown is the person or a stock image some healthy person has stuck up to try and raise cash from the compassion of others.

artyboy

So basically it sounds like it is probably operating technically within the boundaries of not needing to be directly regulated. Which makes sense as I'd imagine any Dragon would have done a good amount of due diligence here. I was more surprised that 2 of them wanted to be associated with 1) the business model, and 2) the deeply uninspiring 'reluctant CEO' that made the pitch!

For reference, I work in financial services, but on the side that might historically/glibly be referred to as 'casino banking'. And even so, it really feels like this is a 'falling through the cracks' case that will at some point come to tears. From a sniff test perspective, how an organisation can argue that they are acting fully at arms length between 2 parties, whilst simultaneously providing a whole host of, let's say, 'facilitation services', is a great bit of doublethink...

And I did consider which board this should be on, but given the case study on their website was positioned to look like a startup business seeking micro investment (specifically to provide financial services to the Bangladeshi community), I went for this one. Feel free to move to loans if more appropriate...

Albermarle

Which makes sense as I'd imagine any Dragon would have done a good amount of due diligence here.
AIUI, the due diligence is done after deals are made on the show, and that about 50% do not actually progress any further.

artyboy

Albermarle said:

Which makes sense as I'd imagine any Dragon would have done a good amount of due diligence here.
AIUI, the due diligence is done after deals are made on the show, and that about 50% do not actually progress any further.

Very true, but the shows are recorded in advance, so I'd have thought that the DD would already be well underway if not completed by now