Why FSCS Protection Matters In P2P Lending
The FCA recently suspended a regulated financial business due to weak controls against money laundering, leaving up to one million account holders unable to access their money.
The suspended company, called ePayments Systems Limited, has nothing to do with theindustry. But it serves as a good example about how can be relevant when lending online and why you might look to lend through P2P sites that offer you some of this cover in limited circumstances.
The story of ePayment Systems
ePayments Systems is an e-money business that takes deposits, issues its own payment cards and arranges digital payments.
ePayments' suspension hopefully will be lifted sooner rather than later, so that customers can access their money. In the meantime, a lot of its customers are surprised to learn that their money is not covered by the Financial Services Compensation Scheme ().
The reason is because ePayments Systems is not a bank, but an e-money business, so it has no UK banking licence. While its customers await further news, many might suffer some consternation now that they know they don't have thefall-back option.
I think this helps to ram home the benefit of using Which P2P Lending Sites Offer The benefit is that, if the company holding your unlent money (the bank) goes under, you have recourse to the compensation scheme. Protection?companies that hold your unlent money in bank accounts rather than e-money “wallets”. We try to list as many of them as possible in
cover in is limited to two scenarios:
- If the P2P lending platform holds your unlent money in a UK-regulated bank and that bank goes under, your money is protected under the usual bank deposit scheme.
- If you have received poor and inappropriate personalised financial advice regarding P2P lending from a regulated business (such as a professional financial advisor), you might be able to claim cover under the investment . (But losing money on your investments doesn't necessarily mean you received poor advice.)
Wheredoesn't apply in
cover in is limited to those above scenarios. For clarity's sake, I'll just spell out the ways that it doesn't cover you:
- If your investments (your lent money) simply perform poorly and you lose money, you're never covered by the . This applies to all investments, from the stock market to .
- If your unlent money is held in an e-wallet, as opposed to a bank account, it will usually or never be covered by the .
- If the P2P lending company fails to hold your unlent money correctly in a segregated account and a shortfall arises, you're not covered.
Which P2P Lending Sites Offer Protection?
Sources: Financial Times