While there is a little regulation in peer to peer lending, savings are not covered by the Financial Services Compensation Scheme (FSCS) so it is possible lenders won’t be able to recover anything as they aren’t protected.
The accounts and assets have been frozen while the investigation is handled by the receiver, Swedish law firm – Lindahl. The Trustbuddy platform has previously lent out £23 million of investors’ money.
This case emphasises the risks associated with alternative finance and the need for more regulation and better understanding of the peer to peer industry in Europe.
What will happen when UK peer to peer lenders become insolvent and how will lenders’ money be protected? With so many businesses popping up in the industry, there are bound to similar problems to Trustbuddy in the future.