Class action lawsuit?

Thats one of the better ones!

Just as risky as investing in the actual platform. And it's true that funding circle terms and conditions allow them to practically wiggle out of responsibility for any of their loans. The terms are drawn up by lawyers and they will just state the usual 'your capital is at risk' statement that they display so much.

If you're comparing them with FC then you're not setting the bar very high

I don't think going down the route of claiming a breach of fiduciary duty of care is the right one. The fiduciary duty only extends to members (shareholders in common parlance) and not to other stakeholders. In short all the director has to do is to say a) this person suing me is not a shareholder and I owe them no duty of care under Companies Act 2006 and b) that he or she acted in what they reasonably believed to be in the interest of the success of the company. 

If you take this legal action is will likely cause you a lot of stress, costs and I suspect you will lose.

You are far better off reporting the concerns you have with these loans as a complaint, firstly to FC and if you are not happy with their response to the FOS. In my opinion you are best arguing that the companies actions did not abide by the FCA's principles - www.handbook.fca.org.uk/handbook/PRIN/2/1.html. Areas to focus on in my opinion would be:

2. A firm must conduct its business with due skill, care and diligence. - You could argue that they didn't do this with regard to due diligence on these loans; and
7. A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading. - You could argue that the information provided to you on these loans did not give a fair representation of the facts.

The previous decisions of the FCA for P2P have erred on the side of not awarding compensation when a loan defaults. They have justified this as the risks were made clear to the investor and that the due diligence and recovery activities were reasonable at the time. It is not reasonable to hold every p2p platform responsible for every loan going bad, as defaults are to be expected.

I think there will soon be further cases and potentially legal challenges to FOS rulings for P2P defaults. I think the current threshold which p2p platforms need to pass on their investment prospectus' are so much lower than the prospectus' for other investments that this situation is untenable. However in the mean time I don't see people having much success in claiming compensation because their loans have not performed as expected.

I don't actually think the right thing is for investors to claim compensation for individual loans going wrong. I think this for two reasons, a) diversified investors may be invested in thousands of loans and it is not practical for investors to complain or for the FOS potentially hundreds of loans per investor and b) as previously stated, loans going wrong is part of p2p lending and if investors can claim for every default from the platform this will only lead to a huge mess. What is more realistic is that sites should have to be a lot more careful in the information they display on historic and expected overall returns. If they do decide to display this information then they should expect to be held accountable when actual performance doesn't reflect what they advertised.  I think some platforms play fast and loose with historic returns by delaying defaulting very suspect loans to increase the returns they advertise to new investors. Even displaying expected returns to investors I believe is very questionable, given the uncertainties there are on whether the actual returns will have any relation to expectations.

shanghaiscouse - I don't think you read my post, your intended route of taking action against directors for breach of their fiduciary duties under the 2006 companies act is not a route which will be successful.

There are no grounds for a class action by FC lenders.

I do believe as I have said before on this blog, that current FC shareholders have a case for a class action against FC directors and the reporting accountants for the IPO. FC loaded up the loan book with c**p to create a market impression that they had huge growth potential and no one at the time of the IPO reported on the state of the loan book as it was not a FC asset.


FC shareholders from the IPO have lost upwards of 75% of share value. They have bought into a company that has no viable business model but were led to believe that it had one. There is no huge growth potential for FC from quality SME borrowers. The banks will always take the best prospects and leave FC with the dross. If FC then attempts to separate out the odd good bits from the dross then there is no growth and simply cash burn.


However if IPO investors had checked these blogs in 2018 they would have realised that we had, by spring 2018 spotted what the game was. I had 19 defaults in May 2018 alone – all from the 2016/2017 cohort.
We were already commenting on the problem lurking in the loan book from spring 2018 onwards.