Peer-to-peer lender MoneyThing collapses after legal battle
Peer-to-peer lender MoneyThing went into administration following a legal dispute with one of its clients, making it the latest lender to fail in a once booming investment arena.
He collapsed after a High Court battle with an anonymous borrower. MoneyThing said it was unable to resolve the dispute and could not afford to defend itself against further litigation. The dispute was over unpaid arrears, of course.
MoneyThing had previously claimed to offer investors returns of 12pc. She raised savings and loaned money to real estate programs and businesses. Other loans were against valuables making it a high end pawnshop.
In December 2019, it announced it would close new business and terminate existing loans following the introduction of tough new rules for peer-to-peer businesses.
Such platforms act as a bridge between investors with liquidity who wish to lend to small businesses or projects and generate better returns than savings accounts or the stock markets. However, it was largely unregulated in its early days and savers were not protected by the Financial Services Compensation Scheme. The space became popular with the invention of the Innovative Finance Isa.
Poor due diligence on the part of platforms and a tough economic environment has resulted in the collapse of many lenders. The industry has also witnessed several controversies and the biggest lenders, Zopa, Funding Circle and RateSetter, have all diversified.
MoneyThing said investor confidence has declined following high-profile issues at other peer-to-peer companies like Lendy, Collateral and FundingSecure. He also blamed the current economic climate for his decision to enter administration.
Tom Straw and Milan Vuceljic of Moorfields Advisory have been appointed joint directors. The process is expected to take 12 months and lenders will continue to earn interest normally.
Some 44% of MoneyThing’s £ 20.3million loan portfolio was in default when the company closed last year. The directors have confirmed that £ 19.3million of capital remains unpaid today.
Customers who have deposited cash with banks can claim up to £ 85,000 from the industry rescue fund, FSCS, in the event of a business collapse. However, peer-to-peer investors cannot claim poor investment performance or platform failure.