Good News As P2P Gets Set For Compensation Cover


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Here's some good news. There's been much scaremongering about the fact that peer-to-peer (P2P) lending is not covered by the Financial Services Compensation Scheme (FSCS), which guarantees the return of the first £75,000 of an investment.

Ryan Weeks at AltFi reports on a possible extension of the much-criticised FSCS to cover investment advice leading to a P2P investment.

"The FSCS guards UK savers against the risk of their bank or building society going under, currently offering coverage for up to £75k of losses. Peer-to-peer investments have to date sat outside of the scheme. A number of major platforms in the UK operate their own internal provision fund structure – which can make investors good in the instance of borrower default – but P2P has never enjoyed the security of a state-backed guarantee," writes Ryan.

"That now appears to be changing. The FSCS has published an update suggesting that it may be able to step in in order to compensate investors who receive "unsuitable advice" about the merits of investing in peer-to-peer lending and loan-based crowdfunding platforms. Depending on individual circumstances, the scheme may be able to provide compensation of up to £50k.

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"There are a number of caveats. Claims will need to relate to advice that has been received on or after 6 April 2016. The firm offering advice must be authorised. The firm must no longer have sufficient assets to meet compensation claims (it's somewhat unclear whether "firm" in this instance refers to the peer-to-peer lending company or the advisory firm). Most importantly, the FSCS has reiterated that it does not provide compensation in relation to losses incurred by poor investment performance. In other words, the scheme will not cover the risk of borrower default."

Come the day that P2P investments are routinely bundled up and sold as the underlying assets in investment funds (investment trusts or open-ended investment companies) the FSCS protection afforded to investors should surely apply.

We think this is good news for everyone, except the scaremongers.

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Loan Latest & Risk Commentary

Here's the latest on our own efforts to help SME funding at Money&Co. The current B+ rated loan offering from JFG Limited, is now in receipt of bids for more than 73 per cent of the £307,000 sought by the borrower. The loan has an indicative gross yield of 9 per cent. Bids for the loan show a current average of 9.6 per cent at the time of writing.

Prospective lenders should bear in mind that more expensive offers of funds will be knocked out by cheaper ones, should the loan be filled ahead of deadline. The borrower also has the right to decline an offer of credit. The loan has a lifespan of 60 months.

Bear in mind that capital loaned is at risk. Read the warnings on site in Lend, our Home Page, FAQs and elsewhere.



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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.