Peer-to-peer lending platforms that closed to investors

Zopa launched in 2005 as the first peer-to-peer lending business, specialising in loans to consumers¹. For years it was the best-known name in UK peer-to-peer lending, matching savers who wanted a return with borrowers who wanted a loan. That business no longer takes new investors. Zopa is now a bank, regulated by the Financial Conduct Authority, and its investing service offers ready-made funds and a Stocks and Shares ISA rather than P2P loans².

If you had money in Zopa's peer-to-peer loans, the important points are these. The Financial Services Compensation Scheme does not cover investments in P2P loans, so there was never a safety net for that money if a borrower defaulted or the platform failed³. Zopa's Safeguard provision fund, which was meant to soften those losses, was retired in 2017 and wound down on 30 November 2020, with the remaining balance paid to investors². Money you hold with Zopa now, in a savings account or cash ISA, is a different matter: eligible deposits are protected up to £120,000 by the FSCS⁴.

This page explains what happened at each stage, what the rules meant for investors, and what to do if you think you were treated unfairly.

Zopa: the first peer-to-peer lender that stopped taking new investors

Zopa's place in the market is unusual because it was first. It was launched in 2005 as the first peer-to-peer lending business, specialising in loans to consumers¹. For more than a decade it ran a marketplace where investors' money funded loans to individual borrowers, and it built its reputation on that model.

That model has ended. Zopa no longer runs a peer-to-peer investing service for new investors. Its current investing page offers two ready-made funds rather than a loan marketplace², and its wider business is now a bank: savings accounts, cash ISAs, a current account and investing products⁴. The company says it is trusted by more than 500,000 customers⁹.

For anyone who invested through the old P2P service, the practical question is what happened to the loans, not what Zopa does now. Loans already made were not cancelled when the platform changed direction. Borrowers still owed the money, and investors were still entitled to repayments as those loans were repaid. What changed was the route: no new money could be put into P2P loans through Zopa, and the contingency arrangement that had cushioned losses was gone.

It is worth separating two things that are easy to confuse. Zopa the brand still exists and still takes deposits. Zopa the peer-to-peer marketplace, as a place to lend money for interest, does not. If you are searching because you had an account years ago, the section on the Safeguard fund and the one on complaints below are the ones that matter most.

The Safeguard fund: how it worked and why it was wound down

The Safeguard fund was Zopa's answer to a simple problem: peer-to-peer lending puts your capital at risk, and investors wanted some cushion against borrower defaults. The fund was a pool set aside to cover losses on loans that went bad, funded from the lending process rather than from investors directly.

It did not last. Zopa retired the Safeguard provision fund in 2017², and then wound it down on 30 November 2020, with the remaining balance paid to investors, who were notified by email². After that date there was no fund standing behind the loans.

The wider lesson is about what contingency funds are. Some platforms offer contingency funds, but these do not guarantee to repay all investors¹⁰. They are discretionary arrangements, not insurance, and they can be closed or exhausted. The FCA's own risk summary for peer-to-peer agreements is blunt about the underlying exposure: if the platform fails, it may be impossible for you to collect money on your loan³.

That risk does not disappear because a fund existed. It sits with the investor. Where a platform removes loans from its book because they are at reasonable risk of capital loss, investors' funds committed to them can be frozen pending enforcement of security, which means the money is locked in until the loan is resolved¹¹. The Safeguard fund's closure moved Zopa investors closer to that position: their returns depended on borrowers repaying, with no pool left to absorb the shortfall.

What P2P rules meant for investors: FCA regulation and the appropriateness test

Peer-to-peer lending is regulated. Dealing in investments is a regulated activity in the UK, so trading platforms require authorisation from, and are regulated by, the FCA¹². Operating an electronic system in relation to lending was added to the Regulated Activities Order in April 2014, which brought P2P lending within the FCA's remit.

Regulation brought rules aimed at making sure investors understood what they were buying. From 9 December 2019, lenders had to pass an appropriateness test before investing, a check that the product matched their knowledge and experience. The point was to slow down anyone treating P2P loans like a savings account.

What regulation did not bring was compensation. The Financial Services Compensation Scheme, in relation to claims against failed regulated firms, does not cover investments in P2P loans³. That is the single most important sentence on this page. Being regulated by the FCA means a firm must meet standards and can be complained about; it does not mean your money is insured.

The FSCS does cover some things, and it is worth knowing where the line falls. It can help with defined benefit pension transfer advice, but only where the adviser has gone out of business and was regulated by the FCA at the time it gave the advice¹³. Targeted support claims follow the same pattern: the firm must have gone out of business and been regulated by the FCA when it provided the support¹⁵. In each case the scheme is stepping in because a regulated firm has failed, not because an investment lost value.

Innovative Finance ISA: where P2P loans fitted in ISAs

Innovative finance ISAs, sometimes called crowdfunding ISAs, let you use your ISA allowance for peer-to-peer lending¹⁶. They were created so that returns on P2P loans could sit inside the tax wrapper, alongside cash ISAs and stocks and shares ISAs.

The wrapper is a tax arrangement, not a protection. Holding P2P loans in an ISA did not make them FSCS protected, and it did not remove the risk of borrower default. It changed how the interest was taxed.

There is also a transfer rule that catches people out. You will not be able to simply transfer your existing peer-to-peer investments into an innovative finance ISA, if the site you invest with launches one¹⁰. The ISA wrapper applies to new investments made through the ISA, not to loans you already hold elsewhere.

If you are trying to work out whether P2P loans still fit your plans, the wider guide to peer-to-peer lending and investment crowdfunding sets out how the market works now, and Are P2P loans and Innovative Finance ISAs FSCS protected? deals with the protection question directly. For the tax side of a loan that has gone bad, Tax relief when a peer-to-peer loan defaults covers what can be claimed.

Savings at Zopa now: FSCS protection up to £120,000

Money held with Zopa today is a different product from the old P2P loans, and it carries different protection. Eligible deposits, meaning the money you hold with Zopa, are protected up to a total of £120,000 by the Financial Services Compensation Scheme⁸. The same limit appears across Zopa's savings and cash ISA terms: money deposited is protected up to a total of £120,000⁴.

That £120,000 figure is the deposit limit that applies to Zopa accounts. It is not the general FSCS investment limit, and it does not extend to the investing side of the business. Eligible investments with Zopa's investing service are protected up to a total of £85,000 by the FSCS², and the same applies to its Stocks and Shares ISA¹⁷.

The distinction matters because the two protections do different jobs. Deposit protection responds to the firm failing: if the bank cannot pay, the scheme steps in up to the limit. Investment protection responds to the firm failing too, but it does not respond to the investment performing badly. Zopa states plainly that the FSCS does not cover losses from investments falling in value². That is true of every investment, not just Zopa's.

If you are comparing where to keep money, savings accounts and ISAs explain how the wrappers and limits work, and what happens if an investment platform fails covers the failure question in more detail.

Complaints and the Financial Ombudsman: 8 weeks, then 6 months to refer

If you think a firm treated you unfairly, there is a set route and set deadlines. Complain to the company involved first. They should look into things and reply within 8 weeks¹⁹, and for most types of complaint they need to give you their final response within eight weeks²⁰. If they do not send a final response letter within eight weeks, or you are unhappy with their response, you can bring the complaint to the ombudsman²¹.

The deadline for referring is the one people miss. You must contact the Financial Ombudsman Service within 6 months from getting the final response from the business⁵, and you will need to make a complaint within 6 months from the date on your final response²³. Miss it and the ombudsman may not be able to look at your case.

The ombudsman service is free to consumers and independent of the firms it covers. It publishes complaints data by sector, including 61 complaints opened about investment platforms in Q1 2026/27²⁴, which gives a sense of how often these disputes reach it.

If your complaint is about a firm that has failed, the ombudsman can still consider it, but compensation may depend on the FSCS instead. Where a firm has gone out of business, the FSCS can only help if the firm was regulated by the FCA at the time, which is the same condition that applies to advice and targeted support claims¹³. For free, impartial help understanding your options, MoneyHelper explains how to choose and use financial services, and debt advice charities can help where money is tight.