Peer to Peer – Lendy

Just over a year ago, in May 2019, P2P facilitator, Lendy, went into administration. It’s being reported today, across various media outlets, that the founders have had their assets frozen given allegations of misappropriation of funds.

At the time of the administration order there were loans outstanding in the region of £150m, with funding coming from around 9000 retail investors.

Looking at some of the loans facilitated by Lendy to business borrowers (by doing a search on companies where Lendy was security holder) it’s fair to say the book is and will be seriously eroded. I suspect those retail investors who lent their money across the Lendy platform will see minimal (if any) returns on their money.

The point being made, not withstanding any wrongdoing, is that lending across P2P platforms is extraordinarily risky. Platforms will entice retail investors with high to very high (certainly disproportionate) returns and then attempt to offset any concerns by quoting their rigorous credit policy and historic default rates.

Some of the credit decisions made are poor, with businesses in some cases, barely, or poorly, scrutinised prior to approval. I have also seen and heard of instances where historic default rates are manipulated, usually by ambiguous definitions of what is classified as default.

There also seems little comfort from the phrase ‘FCA Authorised & Regulated’. Lendy had all sorts of FCA granted permissions (as did others).

Before ‘investing’ across a P2P platform anyone should ask themselves whether they are prepared to lose not just a proportion of their money but their entire investment.

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