end of the party
Peer-to-peer investors were once promised returns of 12pc or more Credit: Toby Dexter

三级成人视频Concerned investors are withdrawing millions of pounds from peer-to-peer platforms every week amid fears that investments in the sector are turning sour.

三级成人视频Peer-to-peer was once seen as an easy way to beat the banks and earn higher interest rates. Investors could lend money directly to small businesses and individuals, and earn returns of 12pc or more.

However, experts have warned the party may be over after a string of platforms collapsed or closed. Others have cut rates or altered their businesses to shift away from the peer-to-peer model.

Roger Gewolb of the Campaign for Fair Finance, a not-for-profit consumer group, said the fledgling industry had proved to be “a disaster” for ordinary investors.

The coronavirus crisis has proved difficult for many platforms to handle, as some borrowers have struggled to repay. But investors who want to flee from these potentially toxic loans face having to wait months before their cash is returned.

“Secondary markets” should allow users to sell loans to others but in some cases, these have been closed entirely.

RateSetter, one of peer-to-peer’s “big three” operators, announced earlier this month that it had been bought by Metro Bank. Earlier in the pandemic, it halved the interest rates offered to investors and diverted the remaining cash into its emergency provision fund used to cover defaulting loans.

When the acquisition is completed, Metro Bank will fund all new unsecured consumer lending originated by RateSetter. Peer-to-peer investors fear that this shift will cause RateSetter’s secondary market to seize up if the number of new customers coming on to the platform dwindles.

三级成人视频Huge sums have been withdrawn already. Figures seen by Telegraph Money show that about £3m is being taken out each week by RateSetter’s investors. However, those who try to retrieve their cash face delays of as much as five months. This week, withdrawal requests made on March 13 were still being processed.

Neil Faulkner of 4th Way, an industry analyst, said the lack of new customers meant there was reduced liquidity on the platform. He said RateSetter’s investors should no longer expect to sell their loans early.

The two other largest platforms, Zopa and Funding Circle, have shifted their business models amid concerns over the viability of peer-to-peer.

三级成人视频Zopa has gained a banking licence and plans to diversify away from the sector. The firm said it would no longer lend to riskier customers and had significantly tightened its lending policy. It has warned customers about increased volatility among its new loans.

Funding Circle is not currently accepting new sign-ups from every­day investors and has paused its peer-to-peer service. The only loans it offers use the Government’s Corona­virus Business Interruption Loan Scheme and are funded by pension funds and investment banks. The firm has no time line for reopening to consumers.

Smaller platforms have also found the going increasingly tough. Growth Street has called a “resolution event”, which effectively means that all loans have been pooled into one. The platform now aims to wind down its business entirely.

Lending Works has ceased paying interest to customers and closed its secondary market. The firm said it had taken these steps to protect investors. The platform has been acquired by Intriva Capital, which invests in distressed companies. It is understood that Lending Works does not expect to reopen its secondary market until the end of the year.

The Financial Conduct Authority, the City watchdog, said it was monitoring the developments and warned firms that any changes to terms and conditions, including secondary markets, must be transparent and fair.

It follows the high-profile failure of several peer-to-peer firms, including Lendy, FundingSecure and Collateral三级成人视频, which collapsed owing investors tens of millions of pounds.

三级成人视频Mr Gewolb said he expected more to fail in the coming months as platforms would be unable to cope with rising levels of arrears.

“The peer-to-peer lending industry has been heading for trouble for a long time,” he said.

三级成人视频Mr Faulkner said investors should spread their cash across at least six providers and a large number of loans to minimise the risk of their money being trapped.

Are you a peer-to-peer investor fearing for their cash? Or do you back the sector to turn it around? Leave your thoughts in the comments section below