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The City watchdog has come under scrutiny from Lord Myners over its role in the collapse of peer-to-peer platforms Lendy and Collateral UK.
Lord Myners, a former City minister under Gordon Brown, has questioned the level of scrutiny the Financial Conduct Authority (FCA) gave to both companies, which fell into administration leaving thousands of pounds of investors’ cash at risk.
The FCA had previously ordered Lendy to pay compensation to some of its customers after the company was found to have missold certain loans. However, £592,000 remained unpaid when the firm fell into administration in May.
These customers are unlikely to receive their full compensation over the misselling, and Lord Myners has asked whether the FCA intends to compensate these investors.
He has also asked how Lendy was able to pay dividends to its owner, Liam Brooke, when the firm was under review by the regulator. Investors in Lendy could face losses of up to 93pc on their savings.
Fellow peer-to-peer platform Collateral UK also collapsed after it emerged it had been operating without the correct permissions from the FCA. The regulator’s own industry register was manipulated by a third party to show the firm as being authorised when this was not the case.
However, as Telegraph Money has previously reported, the regulator took more than two months to close down Collateral, during which time investors continued to pour in thousands of pounds.
Lord Myners has asked what actions the FCA took to protect investors after they became aware of its rule breaking.
The wider peer-to-peer sector has been placed under the spotlight, with Lord Myners questioning whether firms were delivering the promised returns, more than 12pc in some cases, to consumers.
He is also keen to identify any similarities between the Lendy, Collateral and London Capital & Finance, the mini-bond company which suffered a high-profile collapse earlier this year.
The FCA will reply to Lord Myners’ questions in the next 15 days.
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