The Peer-To-Peer Lending Fraud Checklist
This page was last updated on 17 May, 2018
With one 4thWay user describing the ongoing situation at the now closed Collateral UK as seeming “like a right bag of worms”, and with money being removed from its client account and it being shown not to have the required permission from the financial regulator, I thought that it was time to publish a list of very simple, basic checks of fraud, dishonesty, incompetence and other basics.
Even beginners can do the vast majority of these checks before lending through a P2P lending or IFISA provider to gauge whether there are major discrepancies or issues.
Below is a simple checklist you can use to look for signs of fraud, negligence, misconduct, dishonesty or other financial crimes, or even just plain ignorance, before you choose to lend through a peer-to-peer lending website or IFISA provider.
Not all the individual signs on this list automatically mean that there is fraud, negligence or stupidity going on, but the more of these that you see, the more sceptical you should be about lending your money:
- No opportunity to contact by telephone, the telephone number does not function, or the line quality is poor.
- No meaningful response when you attempt to contact them or overuse of highly technical and complicated answers.
- The platform or a “broker” cold calls you to get your interest.
- No entry on the Financial Conduct Authority's online register (read How To Check The Financial Services Register For Monsters) or an entry on its unauthorised firms register.
- Not showing on 4thWay. (4thWay’s experts often doesn’t get a chance to assess and review some sites that will include many of the dodgiest, since they, unsurprisingly, don’t even answer our requests for basic information.)
- Worrying question marks in 4thWay’s assessment of the P2P lending site. (We won’t spot all serious dishonesty, negligence or fraud, but when we are in the position to assess a P2P lending site I expect we’ll be able to warn strongly against most of those situations.)
- Poor quality website.
- Poor English on the website and marketing materials, or an overseas location.
- No secure website. (No “https”, with an “s” on the end, in the website address bar.)
- Claims of being expert while being highly intransparent about the key people making decisions and the processes they use.
- Very few details about their record so far, including incomplete statistics, especially compared to other P2P lending sites.
- Very ambiguous information and wording, conflicting information and statistics that are rarely updated.
- No external sources show in any detail the experience the people in charge have had in the past (e.g. at banks), including the institutions they worked for and what specific posts they held.
- They claim to being linked to or backed by major companies or high-profile figures, but there is no independent source (such as a news publications) backing that up.
- Highly aggressive marketing language, especially saying there is low or no risk or that you have “guarantees”, while also talking up glitteringly high interest rates.
- Be very sceptical of invitations to join exclusive clubs or investments.
- Being rushed to make a decision, e.g. by highly attractive introductory deals that will expire imminently.
- High pressure sales tactics.
- They show frustration when you ask questions or want to get a second opinion.
- The P2P lending site uses conspiracy theories to sell to you. (“The bankers and the wealthy are trying to keep this investment from you.”)
Learn more sophisticated checks as you go
Once you’ve got used to those, there’s always more room to become more sophisticated, such as learning how to use Companies House and read company accounts in order to gather more information about the directors, the business and its finances.