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When Peer-to-peer goes bad

Risk and enforcement

Natalie was an experienced investor and was interested in peer-to-peer lending. She had invested in loans with the peer-to-peer lender previously and things had gone well. Natalie placed a larger investment, but after a month was advised that approximately 10% of her investment had been written off by the peer-to-peer lender resulting in a capital loss for Natalie.

Natalie wanted to know what actions the peer-to-peer lender had taken to recover her funds. Natalie made enquiries with the peer-to-peer lender directly but was only told that it had taken ‘appropriate recovery action’. Natalie asked whether the default had been listed against the borrower at an appropriate credit listing agency, and if not, why not. The peer-to-peer lender advised that it had not listed the debt.

Natalie thought this was strange and that the peer-to-peer lender was not following its usual process. Natalie asked for further information, but was advised that the information she had requested was confidential and would not be released to her.   


Natalie’s complaint

Natalie felt that her peer-to-peer lender was not being upfront about the situation. Natalie was wary after losing money invested in finance companies in the mid- 2000’s and wanted to know more about the peer-to-peer lender’s debt recovery process and whether that process had been followed.

Natalie felt that the peer-to-peer lender had been too hasty in writing off her investments and wanted to be sure there was still a chance at recovery.

Natalie complained to FSCL.



We asked the peer-to-peer about its debt recovery process. The peer-to-peer lender explained its usual process, and that it had become aware that one of the loans in which Natalie had invested was taken out fraudulently in a case of identity theft.

Fraud by a borrower is a separate and distinct matter from debt recovery and is dealt with by the appropriate agency (the Police, the Financial Intelligence Unit, Serious Fraud Office or Financial Markets Authority).

Because the borrower had given a stolen identity to the peer-to-peer lender, the peer-to-peer lender said that it had decided not to follow its usual action against a defaulted borrower. The peer-to-peer lender said that if it had followed its usual actions, a default would have been recorded against an innocent victim of identity theft.

The peer-to-peer lender agreed to provide information to us in confidence about its fraud detection processes and the process it was taking against Natalie’s fraudulent borrower.



The peer-to-peer lender advised that it had made an appropriate report to the police and that a suspect had been arrested, charged and was awaiting trial. We were satisfied that the peer-to-peer lender had sufficient processes in place and that the actions taken by the peer-to-peer lender were appropriate in the circumstances.


Our insight

Peer-to-peer lending is a growing and developing financial service. We can investigate any complaint about the service you are receiving from your peer-to-peer lender if you think it may be contrary to the terms and conditions of the agreement.