Does The FCA Really Make P2P Lending Safe?

Here's a picture to show you what the UK's Financial Conduct Authority does and what it doesn't do to make P2P lending safer.

The FCA has effectively blocked around 300 applications from businesses wanting to start a P2P lending site and I have seen its very strong moves to make existing P2P lending sites behave more professionally.

So it is a useful filter that means that most people's money will not get caught up in scams or high-risk investments.

But accidents will happen!

You still need to look at the FCA's record in supervising the stock market, savings accounts, and other investments and financial products.

Despite the FCA scrutinising all financial businesses, we do still get some mis-selling scandals, IT failures and companies like Tesco giving dodgy information to stock-market investors, or financial companies that don't keep their customers' money separate from their own.

In short, the financial regulator weeds out most of the worst businesses, but it is not invincible.

Consider this additional filter

Spreading your money across P2P lending sites that are regulated by the FCA is a great way to lower your risks.

In some ways, I think 4thWay itself is a second filter. If you look at our comparison tables, we currently list a couple of dozen P2P sites. We want to list all of them, but the fact of the matter is that most are unwilling or unable to go through our very own highly rigorous process, involving collating over 100 data points, two email Q&As and at least one call or meeting with their most senior decision makers.

The result is that our comparison tables are skewed towards better opportunities. Because it is the weaker P2P sites that generally don't feel up to opening up about themselves to 4thWay's candid commentary or to our people with the investment and banking skills to see through the gloss.

That said, we won't always get everything right and we can't spot every lie they make. And some P2P sites will take any publicity they can get, regardless of how negative that is. So not all the opportunities in the comparison tables will be good ones at all times.

But I think if you spread your money across 5-12 P2P sites that are both FCA regulated and listed on 4thWay, you're going to have a hard time losing money.

All the P2P sites shown in pounds (£) in the 4thWay comparison tables either have full or interim FCA authorisation.

Our experts actually put their own views of each P2P lending site into writing – just look for the Quick Expert Reviews in our comparison tables.

Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.

We are not financial, legal or tax advisors, which means that we don't offer advice or recommendations based on your circumstances and goals.

The opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by ESMA or the FCA. All the specialists and researchers who conduct research and write articles for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.