Should P2P lending be restricted to Experienced investors?

I don't think P2P should be restricted to "experienced investors" since the definitions used by regulators are meaningless. The reality, however, is that the initial attempt at regulation of the P2P industry by the FCA is unlikely to be fit for purpose because P2P is evolving too rapidly. A few years ago it was about simple direct lending. The FCA now face issues around market-place lending vs. direct lending models. Products are being created which blur the lines between the platform's agent role and collective investment products. Consumer credit regulation is also really not built to accommodate active loan trading; this requires securities-type regulation but that flies in the face of the governments stated aim for "light touch" regulation in P2P. As mrclondon says the current approach is probably unsustainable. When we get a crisis/crunch in the P2P industry (which we will since every asset class does and P2P is not special), the FCA will likely react by banning retail investors from playing or only allowing them to play via "simple" regulated structures. The problem with these structures is that their costs reduce returns, the "simplicity" often hides more complexity/risk, and they always lessen choice for the end investor. Everybody loses.

Most improvements I'd like to see can be put under the heading of "transparency":
a) P2P platforms banned from comparing their products with savings accounts (or even using the word "account"): they are a form of fixed income product, comparable to speculative grade corporate bonds, ABS or middle-market loans. I'd say that a major error has already been made by allowing IFISAs. A rename of the S&S ISA to an Investment ISA, and including P2P, would have been more appropriate. Instead, the platforms lobbied for a separate ISA product because they want to attract the undemanding, dumb, sticky capital from cash ISAs that is 75% of the ISA market. Great for platforms but P2P is not a replacement for cash.
b) Fee transparency. The idea that "lenders pay no fees" must be stopped; lenders need to know that they are only receiving 40-80% of the interest/fees being paid by the borrower. How can lenders possibly understand the credit risk they take if they don't know what the borrower pays? Funds or IFAs have to tell investors what the fees are; how is it that P2P platforms are allowed to hind behind commercial privilege?
c) Clarity with regard to any product that is not direct P2P lending: provision funds, forms of "quick access" product, diversified "fund-like" products, those with a duration mismatch. It's very hard for me to see how certain products, ones where the lender has no idea which loans are being held, how much is in cash etc, is anything other than discretionary investment management by the platform.
d) More information of what occurs in default/recovery. Many platforms give out very little information regarding issues with loans. That creates a false sense of security for investors. Default and recovery statistics that agree with the standards used in the securities industry and not the nonsense produced by the P2PFA. A more rigid use of the word "default" might be a start.
e) Far more standardization around valuations for security, especially LTVs.
f) Increased focus on operational risk. For example, lenders need to know exactly where cash is being held (some platform directors don't seem to know!) and have access to the "bible" of legal documents that define the trusts and their relationship with the borrower. On one platform there seems quite a bit of confusion on some loans on whether lenders are facing the platform or borrower and what exactly is the position of a loan that is beyond it's expected maturity; how can such question even be possible?

Of course the real solution is to improve the education of the population around financial products but that is simply a pipe-dream ...