Ratesetter Cash ISA - safe?

They offer Innovative Finance ISAs so you could still contribute to a Cash ISA elsewhere subject to the overall £20k annual ISA limit.

Their business model has origins in the ancient world with money flowing from deposits into loans. The difference is that you the borrower rather than the bank are at risk of incurring losses if they exceed the value of the protection fund. As such you are not covered by FSCS protection.

In some ways this could make the RateSetter company safer than a bank as they are not carrying as many potential liabilities - their customers are. You can dig around in the past circa 10 years of Companies House returns for Retail Money Market Ltd who trade as RateSetter to better understand their position.

It's a matter if judgement on if you feel the risk is worth the potential additional return. My view is that with the signup bonus it was worth a punt for the experience however I will probably not extend our exposure above the £1k plus accumulated returns each and have limited the loan durations to 1 year so I can excercise an exit strategy.

See also dedicated forum at
http://p2pindependentforum.com/board/34/ratesetter

Alex