How P2P Lending Providers Stack Up On Ombudsman Complaints

How do P2P lending providers and similar companies offering online direct lending-type opportunities perform in terms of complaints their customers make to the powerful, consumer-friendly Financial Ombudsman Service?

There are no P2P lending companies making it into the Big Lists

The Financial Ombudsman Service publishes half-yearly databases to show the number of complaints made against any financial firm, including P2P lending providers.

It includes the numbers for any firms that have had at least 30 new complaints and at least 30 resolved complaints during the half-year.

I checked back over three years and found no P2P lending or other online direct lending companies in the list. So none of them have been facing huge numbers of official complaints.

That said, most of the companies that do make it into those complaints databases are much bigger than online lending companies. That means they have a lot more customers who can get annoyed about something, receive poor service or even suffer a loss due to errors.

So it doesn't tell you a great deal by itself, and we have to dig a little deeper.

The ombudsman has not had to make a “final decision” on many P2P providers

When you have a complaint, the process is to complain to the company first. Then you complain to the ombudsman, where a case handler gives an initial assessment.

If you or the P2P lending company disagree with that assessment, it gets passed up to an ombudsman. The ombudsman might make a provisional decision. If either party still doesn't like that decision, the ombudsman makes a final decision.

It's these final decisions that make it into the Financial Ombudsman Service's published list of decisions against each and every financial firm. (With some decisions not being published, e.g. if the contents are very sensitive.)

This means that if a P2P lending company or its customers have fought to the bitter end on a case, it will usually show up here. It will also show if the final decision upheld the customer's complaint and what the customer's compensation was.

I found that:

AxiaFunder, Blend Network, CapitalRise, CapitalStackers, easyMoney, Housemartin, Invest & Fund, LandlordInvest, Loanpad, Proplend, Relendex, Sourced Capital and Unbolted all have had no final decisions made by an ombudsman.

That's going back to at least April 2013. That's a very clean record for those providers.

Of all those, I think I'm most surprised by AxiaFunder and Unbolted.

AxiaFunder, because it's about litigation finance – i.e. funding legal cases – and those can be extremely emotionally charged. In addition, when lenders lose money on a case, they often lose it all, so I would expect some to complain to the bitter end.

It suggests that AxiaFunder has explained the risks clearly and people have been convinced that the losses were normal when funding court cases.

I would also have expected a pawnbroking lender like Unbolted to have had at least some complaints from its many borrowers, because people can be more on the desperate side by the time they're putting their TAG Heuer watches up as collateral on a loan.

Some customers and providers have received “final decisions” – with mixed results

Less than half of P2P lending providers have had any final decision issued regarding complaints against them.

Most of those have faced very few final decisions – even when you give consideration to their size and number of customers.

Furthermore, when final decisions needed to be made, the complaints were mostly from borrowers, not lenders.

On top of that, most complaints have not been upheld.

And, when ombudsmen (sorry, there's no gender-neutral word for this yet) have upheld complaints, the amount they have decided that the customers deserved in compensation was usually just in the hundreds of pounds. That's even though it historically hasn't been scared to force companies to pay compensation up to the limit – currently £455,000.

Here's how past complaints break down:

Crowd2Fund

Crowd2Fund had just one complaint with an ombudsman needing to make a final decision, and that was last year. It was a lender who complained.

The ombudsman didn't uphold that complaint.

CrowdProperty

CrowdProperty has had five complaints against it going to a final decision, with the first in 2021.

(It wouldn't surprise me if there are more such decisions in the works. Long-suffering loans have steadily been officially written off since late last year. Plus, 4thWay's records show lenders have complained to 4thWay about CrowdProperty's slow and uninformative loan updates in recent times.)

Just one of those five decisions was a complaint from a lender, and that was not upheld.

One of the other four complaints was upheld. In that complaint from a borrower, CrowdProperty had to pay the equivalent of over half of the interest it had earned on one part of a development loan. That amounted to around £7,000.

Downing Crowd

The company behind Downing Crowd is very substantial, and so it has other product lines. Nevertheless, there have just been two final decisions against its entire business since 2015, and neither was upheld.

Folk2Folk

This one had two final decisions in 2023, both from lenders, with one upheld.

That required Folk2Folk to pay out £200, although, on reading the decision in full, I find it odd and probably incorrect that this one was officially logged as a complaint that was “upheld”.*

HNW Lending

Two final decisions again, with the first in 2018. Both were borrowers. One complaint was not upheld, and the other resulted in an order for HNW Lending to pay the borrower £350.

Kuflink

It's had two final decisions, with the earliest in 2022. One was from a borrower that was not upheld, and another was from a lender that was. The lender was awarded £300 compensation.

(Like CrowdProperty, with 4thWay logs showing some lenders that are currently angry with Kuflink, I wouldn't be surprised to see more of these soon.)

Lendwise

Two final decisions from borrowers since 2022. One of them was upheld, and the ombudsman effectively ordered Lendwise to convert it into an interest-free personal loan.

rebuildingsociety

Four complaints, all upheld, the first in 2022. Two of the complaints appear probably to be a husband and wife making the same complaint about similar problems they had through each of their lending accounts.

For three of the complaints, rebuildingsociety was ordered to pay between £250 and £450.

The fourth amount was unspecified by the ombudsman in the actual decision letter, but it stated what rebuildingsociety should do “if the calculation of fair compensation exceeds £160,000”. This was probably a very substantial payout and by far the largest of all that I found today.

That particular decision was regarding rebuildingsociety's handling of a lending account of a deceased lender with a lot of money in it and in part about fees paid by the deceased lender.

Somo

Somo's online direct lending arm has received 14 final decisions, with the earliest of those in 2020.

All of these complaints were from bridging-loan borrowers and none from lenders.

Two were upheld. One of those borrowers was then the recipient of £200 in compensation. The other was quasi-upheld for £250, under similar strange circumstances to the Folk2Folk complaint.*

(There have also been a couple of dozen final decisions about small retail-finance loans that Somo disburses through another non-online lending arm of its overall business – mostly not upheld.)

The Money Platform

This has received 28 final decisions, all about borrower complaints, with the first in 2017.

16 complaints were upheld, mostly for irresponsible lending.

As this platform does payday loans, I think these are always a fine line between responsible and irresponsible lending even on a good day. In my view, by the point many people are desperate enough to need such a loan, it's already gone past the point where borrowing even more money is the answer.

I would therefore expect the Financial Ombudsman Service to rule sometimes in a borrower's favour against such providers.

Still, I looked at four other competitors in payday lending; all had more complaints than The Money Platform – most had far more.

WiseAlpha

Finally, WiseAlpha had one complaint. It was from a lender but not upheld.

What slips through the cracks?

The first database I mentioned is for 30+ complaints in six months, and entries in the latter database only arise when ombudsmen are pushed right to the end and have to make a “final decision”.

That means that, unbeknownst to us all, there can be P2P lending companies receiving dozens of complaints about them to the ombudsman every year but who settle with customers before the final decision needs to be made.

Nevertheless, if that were happening a lot, I would still expect to see higher numbers of angry customers who have insisted on more final decisions. So I think the low numbers of upheld complaints are very reassuring.

Don't be disheartened!

Surely, you should be relieved that there are not a lot of complaints and that most are not upheld, but you shouldn't be disheartened if you feel you have a legitimate complaint yourself!

Don't be deceived: the ombudsman doesn't favour financial companies over you and has incredible power to force them to accept its decision and to force them to compensate you. That's even while you're allowed to reject its decision and face no costs or consequences for complaining.

To learn more about complaining to the ombudsman service and what it can do for you, read the recently updated page: How The Financial Ombudsman Protects Your P2P Lending.