Consumer crowdfunding is a market driven by digital platforms where individuals and households seek credit from non-professional lenders. The platforms match the demand for credit from borrowers with the supply of capital from investors without participating in the peer-to-peer lending. Consumer crowdfunding forms a fringe of the credit market, primarily catering to those excluded from traditional bank financing and in need of credit for consumption purposes. Since the launch of the platform Zopa in the UK in 2007, the sector has grown in the shadow of the law. Regulatory inertia and the fear of stifling digital innovation have made regulators reluctant to intervene. To take just one example, EU law has repeatedly chosen not to step in, as Regulation (EU) 2020/1503 explicitly carves consumer loans out of its scope. Amidst scarce interest from public regulators, the law of consumer crowdfunding is largely set by the financial firms involved in the sector, which decide on the rules of participation and engagement. The legal form of these rules is the contracts drawn up by the platforms and signed by the consumers. Despite this, legal research has paid little attention to the regulatory and ordering power exercised by crowdfunding contracts and its implications for financial markets and private law. Against this backdrop, Rule of Contract conducts a comparative analysis of the law of consumer crowdfunding in three European jurisdictions: Germany, the UK and Italy. The three case studies embody distinct models of crowdfunding regulation by public authorities and private rule-making, as well as three markets that differ significantly in size and shape. The book combines the analysis of the institutional context and the positive law, as well as the empirical analysis of selected platforms’ terms of service in the three jurisdictions. Its main claim is that consumer crowdfunding epitomises an uncharted rule-making role of private law in finance. In the absence or weakness of public regulation, platform-drafted contracts constitute the primary legal framework of the sector.
By articulating this argument, the book makes a key contribution to the field of comparative law and finance. Besides significant regularities, the rule of contract in digital finance indeed varies according to the national institutional and legal context. It is stronger in countries like the UK and Italy, where financial regulation, banking law, and contract law are more accommodating, and weaker in cases such as Germany, where financial regulation is less favourable to privately-set consumer markets. However, the book’s findings are also highly relevant to the relationship between private law and finance and its political-economic spillovers. Beneath the narrative of disintermediation and democratisation, crowdfunding platforms draw on private law modules and rules to transfer financial positions and risks to the crowd, thus enhancing financialisation and shifting financial burdens to the less-sophisticated actors at the periphery of the system.