Peer-to-peer (P2P) lending has grown very quickly over recent years. It is a system whereby an intermediary acts as a broker to enable individuals to make loans directly to those seeking loan finance.

The attraction for the borrower is often that they can borrow relatively small amounts of money in a less formal way and at less cost than borrowing from an established financial institution. For the lender, the available rates of return are much higher than those offered on the high street.

However, P2P lending is riskier than placing money on deposit and, as a result, the P2P lending industry is regulated by the Financial Conduct Authority.

It has recently been confirmed that the Financial Services Compensation Scheme is able to provide compensation for P2P lenders who have lost money if they have acted on the advice of a firm that is authorised by the appropriate regulator to give investment advice where the advice was given after 6 April 2016.

Such claims will only be considered where the advisory firm does not have sufficient assets to meet the claim, and are limited to a maximum of £50,000.


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