The Central Bank of Ireland (the Central Bank) has published a notice alerting consumer to the fact that crowdfunding, including peer-to-peer lending, is currently not a regulated activity in Ireland. Consumers who engage in crowdfunding activity should be aware of the following:
- The Central Bank’s codes of conduct and the protections which they provide to consumers, do not apply to crowdfunding platforms;
- Crowdfunding platforms are not required to comply with client asset rules;
- Consumers of crowdfunding are not protected by the Deposit Guarantee Scheme or the Investor Compensation Company Limited (ICCL) scheme; and
- Complaints in relation to crowdfunding cannot be made to the Financial Services Ombudsman (FSO) as the FSO only deals with complaints in relation to a regulated firm.
The Central Bank has also advised on the specific risks that consumers should consider when participating in crowdfunding, including:
- The risk of the crowdfunding platform failing with a potential loss of some or all of their money;
- The risk of losing some or all of their money, should the business receiving the loan or investment fail, or the borrower default on loan repayments;
- The risk that the return on their investment is less than expected; and
- The risk of misleading or insufficient information disclosure, unfair contract terms or misleading commercial practices, and the absence of dispute resolution and redress mechanisms.