Regulator Warns About Innovative Lending

The Financial Conduct Authority has warned that higher-risk Innovative Finance ISAs (IFISAs) are being promoted alongside ordinary cash ISAs, potentially misleading customers. The warning came after the FCA board was directed to investigate the collapse of London Capital & Finance, which went into liquidation in January 2019.

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High Risk

Innovative Finance ISAs, or IFISAs, were introduced in 2016, and use part or all of an investor’s annual ISA allowance to invest in peer-to-peer lending and mini-bonds, which lend directly to an individual or a company for a set period of time in return for interest payments. The higher rate of return is more attractive to investors, who may be disillusioned with rates offered by a cash ISA.

However, with greater return comes greater risk. There’s no guarantee that the individuals or companies the ISA money has been loaned to can repay the interest or the capital. Furthermore, unlike cash ISAs, those investments may not be protected by the Financial Services Compensation Scheme, meaning that investors wouldn’t be able to claim any money back if the borrowers fail to pay back. Approximately 11,000 LC&F investors who had been expecting returns of up to 8% annually were warned that they may only see 20% of their money back after the firm’s collapse.

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The event has since led to investigations into the supervision of LC&F and whether current regulations adequately protect people who purchase mini-bonds. In addition, the Serious Fraud Office, working with the FCA, has opened an investigation into the individuals behind LC&F.

Independent Financial Advice

Stories like this can be daunting for anyone looking for safe investment advice. However, the FCA is there to protect existing and potential investors by regulating financial advisers, their activities and the products they sell. Finding a regulated reputable independent financial adviser is the first step to safer investing. But what is an independent financial advisor ? If you’re in the Wiltshire area and looking for an independent financial advisor Marlborough, Calne and other surrounding towns will have at least one available.

If you feel what you’re being sold is unclear, the FCA’s advice on spotting misleading information about a financial product may help.

The guidelines are designed to help you understand the product and if it – and the financial adviser selling it – is right for you.


Richard Anderson


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