Lending through Funding Circle is not covered by the Financial Services Compensation Scheme.
As an FCA authorised business we are required to have a back-up servicing arrangement in place. This means that in the unlikely event that Funding Circle ceases to trade, the back-up service provider would take our place in operationally managing and administering existing loan contracts between investors and borrowers, and Funding Circle Ltd would cease to manage these loan contracts on behalf of investors. The back-up service provider would continue to receive loan repayments from borrowers, and to process and distribute these payments to you.
Our current back-up service provider is Equiniti Gateway Limited t/a Equiniti Credit Services (”Equiniti”). Equiniti is authorised and regulated by the Financial Conduct Authority to administer loans and to collect debt on behalf of investors. Equiniti is also authorised by HMRC as an ISA Manager, and would be able to take over the administration of Funding Circle ISA accounts. This means loans held within a Funding Circle ISA would keep their tax-free benefits. However, as Equiniti is a separate legal entity to Funding Circle Ltd, it is possible that the regulatory protections afforded to Funding Circle Ltd may be reduced or no longer available once loans are transferred to Equiniti. This depends on its ability to maintain the permissions afforded to it by the FCA.
Investor funds that have not been lent to borrowers, or that have been repaid to investors and not been lent out again, are held by us in separate client money bank accounts with Barclays Bank plc and National Westminster Bank. These funds are completely separate from Funding Circle’s own money and we cannot use client money for our own business purposes. These funds do not form part of our assets which means that they would not be available to creditors in the event of our insolvency. Client funds are ring-fenced in a separate bank account and held on trust for investors in accordance with the FCA’s Client Money (CASS) Rules.
It is important to note that these protections apply only to cash held in these client money bank accounts and not to the funds invested in loans at any point in time.