Advice to invest in peer-to-peer (P2P) lending may now be covered by the Financial Services Compensation Scheme (FSCS), the body has confirmed, as it reveals the criteria claimants must meet.
The FCA consulted on the move in February and announced its decision in March, ahead of new rules which made providing advice to clients about the merits of investing in P2P agreements a regulated activity on 6 April.
Eligible investors may now be able to receive compensation in relation to unsuitable advice they receive about the merits of investing in P2P lending via loan-based crowdfunding platforms, according to a statement on the compensation body’s website.
Depending on individual circumstances, the FSCS may be able to provide compensation of up to £50,000 in relation to P2P investment advice.
Including P2P advice in FSCS coverage addresses one of the major industry concerns about the sector for investors.
But with former FSA chairman Lord Adair Turner saying back in February that losses on P2P lending will “make the worst bankers look like absolute lending geniuses”, the move could put further strain on the FSCS and advisers who fund it via levies.
P2P lending sites have been regulated by the FCA since 1 April 2014.
Adviser view:
Alan Mellor, managing director at Cheshire-based Phillip Bates & Co Financial Services, branded the move “great news for scammers”.
He added: “It’s a massive headache to get adequate due diligence for advisers, but easy to set up and sell fraudulent P2P and get the usual suspect advisers to recommend them – then the FSCS foots the bill – the next stage of meltdown for the scheme.”
laura.miller@ft.com
