Zopa Italy’s License Cancelled by the Bank of Italy (Updated)
Seemingly out of nowhere, Zopa Italy‘s license to operate as a financial intermediary was cancelled by Italian regulators at the Bank of Italy. As a result, Zopa Italia has halted all lending activity on the site, and has posted a message on the home page linked to an FAQ. This is the message:
Zopa entra in standby
In data 10 luglio 2009 è stato notificato a Zopa il decreto del Ministero dell’Economia e delle Finanze che, su indicazione di Banca d’Italia, ha cancellato dall’elenco degli intermediari finanziari ex art. 106 la nostra società. Come conseguenza immediata ci vediamo costretti a sospendere la trattazione di nuovi prestiti e l’ingresso di nuovi Prestatori.
La società sta valutando tutte le iniziative, anche di natura giurisdizionale, per tutelare la propria posizione e la community. Vi terremo informati su tutte le attività che metteremo in atto per salvaguardare un’iniziativa innovativa, etica, sociale e vantaggiosa per tutti i partecipanti.
Which the Zopa UK blog has translated into:
On 10 July 2009 Zopa Italy was notified of the cancellation of its licence to operate as a financial intermediary (106) by the Ministry of Economics and Finance, by indication of the Bank of Italy. As a consequence Zopa Italy has stopped issuing new loans and accepting registration of new lenders. The company is evaluating all initiatives, even at judicial level, in order to protect its position and its community. Zopa Italy will keep you informed on all activities put in place to safeguard an innovative, ethical and social initiative that bring benefits to all participants.
Zopa is not giving any further detail on why their license was revoked (perhaps even they do not know see “Update” below), but the Zopa UK blog post mentions a recent inspection by the Bank of Italy. Apparently the outcome of that inspection was some issues that Zopa should address, but the notice of cancellation arrived “without further discussion”.
Zopa Italy will continue servicing loans during this suspension period. Zopa, who has funded over 7.1 million Euro ($9.9 million USD) in loans since their launch in November 2007, is the leader in “prestiti personali” (P2P lending) in Italy, with about 10x the loan volume of competitor Boober Italia. Boober, which is a subsidiary of Italian financial services provider Centax, and is also regulated under the Bank of Italy, has no indication on its site that there are any issues.
As we have seen in recent years in the US, a lack of government regulation can put an economy in great peril. But misguided and overbearing regulation can be equally damaging of progressive and innovative business models. In the world of P2P lending, we have seen Lending Club, Prosper, Boober (NL), Loanio, and IOU Central all close their businesses (or suspend them, at least) due to the action of government regulators. We hope that Zopa Italy’s suspension doesn’t last long.
Update: A spokesman for Zopa Italy has given us more information about the shutdown order. The Bank of Italy has accused Zopa of operating as a bank without a license. Zopa maintains that they are just intermediating payments between private parties, but the issue hinges on Zopa’s “transit lender account”, where lender money is held before it goes out in loans, and which would qualify Zopa as a banking institution. According to Zopa, the transit lender account does not earn interest, and is not counted among the assets of the corporation. Zopa has proposed an alternate solution to the issue, but apparently the Bank of Italy has decided to shut everything down before proceeding.
This points out yet another problem with government regulators, which is that, in general, they don’t take the time to understand new concepts before greenlighting them in the first place. Zopa had authorization from the Bank of Italy before launching Zopa Italy in the first place, and most likely that “transit lender account” was in place from the beginning. Because regulators failed to fully understand the system before approving it, now they are handicapping Zopa unfairly.