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When I wrote this piece (Peer2Peer platforms – A conflict of interest) in August last year our lawyers said that I could not name the company concerned – Lendy plc. I can now. And I can also draw your attention to the paragraph in which I question the sanity of the FCA in approving their business model in July last year. Investors will be lucky to get 20% of their money back – and heads should roll at the FCA because this was one of the easiest investment business failures to predict in years.

The directors of Lendy followed the age old tradition of…….

• Starting a niche business (lending against luxury yachts) and then diversifying massively because the first plan didn´t work
• Growing their loan business so improbably fast that there just couldn´t be adequate due diligence
• Changing their covenants so that not till a loan repayment was 180 days overdue till they have to class it as a default (to hide from investors quite how bad their loan book really was)
• Building swanky seafront offices in year four of operation
• And finally, in year 3 of business – becoming the title sponsor of the Cowes week yachting regatta. Sadly………you don´t have to make it up

Even when the FCA took over the bank accounts of the business the directors were still emailing investors to tell them that late payment was a banking software issue. 68% of the loan book was over 180 days late at this time. As they continued to take in investor money.

Peer2Peer platforms like Lendy cannot be a good investment because there is a fundamental conflict of interest. The platform relies on arrangement fees from loans for its income. If it refuses loans to borrowers that won´t repay; accurately values property against which loans are secured and so cant lend; or is wholly honest about the risks and so minimises the number of lenders…….then it will not generate the fees it needs to survive.

Investment Owl warned our clients and the FCA about Lendy. Our clients didn´t invest – thank God. The FCA licensed a model and a business that was not fit for purpose.

Peer2Peer lending can be a fantastic investment. Never through a platform and rarely to individuals. But there are businesses out there that are seeking to borrow money, capable of paying the returns, have good management teams, a proven record of repayment, and the assets to REALLY secure your money – with contracts and governance that deliver peace of mind.

And there are businesses out there that are still taking in investor money and are absolutely guaranteed to fail. Legally I can´t name them but I have again flagged them to the FCA. Before you part with your hard earned money ask my opinion and I´ll give you both barrels! No charge for the opinion – jon@investmentowl.com