Lord Adair Turner, the former chair of the Financial Services Authority, told Radio 4’s Today programme that “the losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses”.

Peer-to-peer lending platforms bring together savers and borrowers by cutting out the middle man such as banks with the idea that savers make greater returns for the additional lending risk, while borrowers get more attractive rates than those offered on the high street.

Co-founder and chief executive of peer-to-peer player LendInvest, Christian Faes, slammed Lord Turner’s comments, saying they were timed to “drum up” more book sales.

“I don’t think we can trust the person who presided over the worst financial meltdown in history to tell us who are or aren’t lending geniuses,” Faes said.

“His comments also do the FCA a disservice. Having just returned from meeting P2P companies in China, I’ve seen the real P2P Wild West in action. The FCA is doing the right thing by regulating our industry. It might cause a shakeout, but this is a good thing and will leave the lenders that remain stronger, more confident and more credible.

“These comments are self-serving and timed to drum up more sales of Lord Turner’s book on Amazon. Surely he is conflicted too, given that he’s now regulator-turned-banker himself.”

The sector’s industry body, The Peer-to-Peer Finance Association (P2PFA), said his remarks “fly in the face of the evidence”.

Christine Farnish, independent chair of the P2PFA said: “Anyone who has followed our industry closely will see that this morning’s comments fly in the face of the evidence. Since the industry began, default on loans are low, measuring between 2-3%. We only lend to creditworthy consumers and established small and medium sized enterprises. Strict credit underwriting rules apply to all our members and this should not be confused with higher risk forms of crowdfunding or lending to sub-prime customers.

“All members of the P2PFA operate with high standards of transparency and business conduct. This includes publishing their full loan books on their websites and providing clear information on all fees and charges to both investors and borrowers. I would challenge anyone to find this level of transparency in any other part of the financial services market.”

Recent data from the P2PFA reveal peer-to-peer lenders lent more than £2.2bn in 2015, making it a record year for the industry.

In the same interview, Lord Turner told the BBC that interest rates in the UK may not go up beyond 2% by 2020.