News Column

Registered, regulated but still Quakle failed

February 15, 2014

Rupert Jones



It was the peer-to-peer website "for community-minded people" who wanted to lend money to each other in a "friendly and structured way".

But, as Quakle discovered to its cost, there are no friends in business. The business collapsed within a year of its launch - brought down, it is understood, by the fact it accepted too many poor-quality borrowers.

Quakle - prounced quake-el rather than quack-el - is probably the UK peer-to-peer lending sector's best-known failure, though to be fair to the industry it was a pretty small player and collapsed more than two years ago. It is thought it probably had only a few hundred customers.

Nevertheless, it just goes to show that you have to tread very carefully. When it launched in November 2010, would-be investors would doubtless have been reassured by the fact that not only was Quakle "registered with the Office of Fair Trading and HMRC", it was also allegedly the only peer-to-peer lending site to be regulated by the City watchdog as a "small payment institution".

Last October, the Financial Conduct Authority stripped it of this status "in order to protect the interests of consumers".

The company said, at the time, that all borrowers were credit checked and then rated, but according to one industry observer the site attracted people with "less than ideal" credit records. Also, it didn't sign up enough lenders (with hindsight, its offer of pounds 30 to anybody who registered as a lender was probably a bit of a giveaway).

A few other UK sites have also come and gone: Bigcarrots and Squirrl.com no longer seem to be around.

Increased regulation of the sector from April is likely to provide greater reassurance to investors, and may also trigger a shakeout in the industry.

This type of lending is increasingly a global phenomenon, though last month the Financial Times carried an article claiming that China's peer-to-peer lending boom "is beginning to turn to bust". It said dozens of websites had shut as a result of borrowers defaulting, and claimed this was an early warning that rising interest rates "could pose problems" for the sector in Europe and the US.

Rupert Jones


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Source: Guardian (UK)


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