Is my experience normal?

A fairly normal FC experience i feel, unfortunately. I stopped investing in new business loans when fixed rates came along as unsecured lending at those rates was IMHO lunacy and after a number of very early A ranked loan defaults making one or a few payments before defaulting I sold out most of my hand picked SME loans and I moved to property loans, taking cashback when it was there but always selling on 2-3 months from expiry and have had no defaults since. Now I have held on to a reducing portfolio of property loans, highly diversified and lower LTV which I am letting run down to (hopefully) full repayment.

Recovery on my defaults has been very minimal and overall I expect less than 10% to come back and it will take years. I have made a decent profit out of FC but it was a huge amount of work and my saviour on the losses front was diversification and selecting loans carefully. Had I not done this I am sure I could well have made a loss.

Would not trust autobid, even in its new "fairer" form, due to poor quality of loans coming through even as A+ and As so unlikely to ever invest further in FC. It was fun though 

Property development loans, which most of FC's interest only loans are, routinely run late because of over optimistic estimates or unforeseen delays. Often, defaulting the loan and calling in security is counterproductive, since the part-developed site is worth less than the completed development, so usually FC (and other platforms) will allow the developer to continue, and the loan continues to accrue interest, often at a higher rate. The trouble is, these development loans need a lot of monitoring, site visits, progress reports, etc, especially if the borrower is not cooperating or spinning a line, which I think is why FC is pulling out of them; there isn't enough margin to cover the costs of monitoring. This is something other platforms are also going to learn the hard way too (Funding Secure are going through the pain at the moment with a loan where they believed the borrower's tales rather than trogging up to Cumbria to have a look, which has turned out to be a costly mistake).

FC's recovery rates on unsecured loans is actually pretty good, given enough time the average recovery rate is better than 40%, although individual loans range from nothing to full recovery so the average doesn't mean much for your £55. However, there is a reasonable chance that you will recover at least some of it, although it may take several years. £55 is 7.8% of £700, so, while you have been unlucky, FC do, in many places, warn about the dangers of not diversifying.

That said, of course, with a £20 minimum bid you can't diversify your £700 over more than around 35 loans, at least at the outset, which highlights that FC is also not really a platform for smaller investments; to meet FC's Autobid target of no more than 0.5% per loan, you need to invest £4000. Smaller investments, IMHO, are better suited to fixed rate or provision fund protected products like Ratesetter or AC's automatic accounts because early losses hit a smaller account hard.

The short answer is that your experience is - unfortunately - entirely to be expected.   Every platform's assessment of loan "class" (A+-E or whatever) is based only on the sophistication of their risk analysis and whatever assessment they have made of any security's worth.  Those have proven to be variable - to put it mildly - over recent years as the biggest platforms have grown beyond the point at which every borrower can be analysed in any depth.  Hence many platforms, including FC, have moved to a completely "black box" approach which has little to do with the original precepts of peer-to-peer lending.  Basically, you put a lump sum in, diversify as much as your capital and the platform's metrics allow and hope that the platform's estimates of returns prove accurate. 

The risk of default is theoretically covered by platforms with a provision fund (though see debate ad nauseam on this forum on how much you are really protected).  So yes to Assetz Capital and Ratesetter, but no to Zopa and FC.  Alternatively, you select investments yourself (e.g. Assetz Capital or Funding Secure) and accept the higher risk for higher return OR use those same platforms to "black box" invest at comparable returns to FC (possibly better) with lower risk than FC's products.

If you really want to persevere with FC, the "least worst" option is to invest an absolute minimum of £4,000 via the new automated process, specifiying a maximum of 0.5% investment in any single loan. The £4k figure comes from FC's minimum cash sum per loan of £20, factored by the maximum diversification of 0.5%. Be aware that FC's total expected portfolio return to investors is 6.7%, though you will see the target for maximum diversification across all asset classes as 7.2%.  That can only be achieved by a sufficient number of investors going for the cautious A+/A portfolio option and effectively foregoing their true profits.  In short, FC are betting that in what is targetted as a mass-market product, there will be enough "mugs" to provide the returns for more sophisticated investors such as the people who read this forum. FC are probably correct....

Alternatively, for a quiet life, albeit with some exposure to USA loans, look at the FC investment trust (fcit), which will solve the diversification issue, and offers a clean exit (at a price). Once you could even buy it at a decent discount, but not at the moment iirc.

Otherwise expect defaults and a V E R Y long drawn out recovery process.