In these tough times, it is understandable that people are looking for a return on their hard-earned cash. However, many people may not realise the Financial Services Compensation Scheme does not protect money in peer-to-peer lending companies.
The issue came to light recently with the failure of one of the firms, Quakle.
In the last 18 months savers have switched £192million into these ‘money exchange' websites, where consumers can borrow and lend money to each other. They agree the rates between themselves and avoid the charges typically laid on by banks.
Despite the often very attractive rates, the Financial Services Compensation Scheme is reminding people of the protection it provides for financial services products.
Mark Neale, Chief Executive of the FSCS, said:
"It is understandable consumers want the best rate of interest for their savings in the current climate. And peer-to-peer lending may be the right choice for some people who are looking for a return on their savings or want a competitive loan rate.
"It is important to remember though the FSCS does not protect the money invested though peer-to-peer lending companies.
"The FSCS protects the money held in an authorised bank, building society or credit union up to £85,000 per-person or £170,000 for joint accounts."
