The Daily Telegraph - Saturday - Money
EasyMoney savers ‘don’t know where their money is invested’
Peer-to-peer firm easyMoney has said it will overhaul its platform amid criticism of its quality of disclosure and concerns that it puts its customers’ money at greater risk than they realise.
One Telegraph Money reader said he had no idea where his cash was invested, while other investors complained on online forums about poor transparency at the firm.
One analyst said easyMoney had “among the worst levels of disclosure” in the sector.
The platform carries the “easy” brand made famous by Sir Stelios Haji-Ioannou’s budget airline easyJet and offers returns of up to 7.3pc on a £10,000 investment in property projects.
Customers are given a unique reference number and repayment date but no information about the property location, size of loan or the percentage of its value that has been borrowed.
The easyMoney system can also leave customers highly exposed to just a handful of loans, rather than being properly diversified. One example seen by this newspaper showed 40pc of a customer’s cash was in just two loans.
By contrast, most peer-topeer websites allow users to choose the projects they invest in, otherwise their cash is automatically diversified across many investments.
Lack of diversification can cause huge problems for investors should one of these loans fail to be repaid. In theory, if a customer’s cash were spread over a greater number of loans then the impact of any individual failed loans would be minimal.
Neil Faulkner of 4thWay, a peerto-peer analyst, said the quality of information provided was sub-par. Users of the easyMoney platform are offered high returns in exchange for £10,000
“Disclosure on the easyMoney website before investors register is not complete enough for investors to fully consider the platform’s competence and the level of risks,” he said.
Mr Faulkner expressed concern that, for a time, investors may have all their cash in a single loan.
He added: “The simple rule is that if you don’t feel like you understand everything about the borrowers, security and platform that you could possibly need to know, don’t invest.”
In response, easyMoney said it was increasing transparency in line with new industry rules, which take effect on Dec 9. The platform promised that it would soon provide details of properties’ residential or commercial status, the purpose of the loan and whether it is a first or second charge mortgage, so investors can tell whether others also have a legal claim on the property.
A spokesman added: “EasyMoney is clear to investors that investing in peer-to-peer loans involves risk and we have always displayed prominent risk warnings on our website.”
The firm said that those investors who are the least diversified would have their cash spread over more loans in the future, as and when new borrowers come on to the platform.