The Financial Services Compensation Scheme (FSCS) has reminded individuals that it does not protect money in peer-to-peer lending companies.

It says the issue came to light recently with the failure of one of the firms, Quakle.

The FSCS says the in the last 18 months savers have switched £192 million into these ‘money exchange’ websites, where consumers can borrow and lend money to each other. They agree the rates between themselves and avoid the charges typically laid on by banks.

Mark Neale, chief executive of the FSCS, said: “It is understandable consumers want the best rate of interest for their savings in the current climate. And peer-to-peer lending may be the right choice for some people who are looking for a return on their savings or want a competitive loan rate. It is important to remember though the FSCS does not protect the money invested though peer-to-peer lending companies.