|« How to grow a successful P2P site||Funding Circle launch first property loan »|
RateSetter's 100% fund
RateSetter was the first peer-to-peer company to introduce the concept of provision fund to protect lenders where a borrower is unable to repay a loan. This is a fund that would step in and reimburse lenders all outstanding capital and interest, and then chase the borrower for repayment. All borrowers pay into this fund by means of a fee when they take out a loan.
This provision fund has today been re-branded as the 100% Fund. This is to highlight that while there is no Financial Services Compensation Scheme (FSCS), RateSetter has been able to ensure that all lenders have received back every penny they have lent.
Here is the full press release:
P2P pioneer RateSetter took to the streets of the capital to raise the issue of saver protection and promote the ground-breaking platform’s 100% Fund.
Bemused onlookers witnessed a man swaddled in bubble wrap rolling down stairs and facing a series of perilous challenges – including the daily struggle with tube doors. The stunt highlighted that, whilst the 100% Fund can’t protect you from everyday life, it does protect your money!
RateSetter believes the focus of the burgeoning peer-to-peer (P2P) industry post-regulation should be on ensuring no saver ever loses money, even if borrower defaults increase in a souring economy.
The platform’s Provision Fund is the most established in the industry, the largest at £4m, and boasts a 100% track record. None of its 11,500+ savers have lost a penny since RateSetter launched in 2010, despite over £210m having been lent out. This is a unique feat amongst the major P2P lenders.
In recognition of fundamental advancements that the platform has now made to continue this impressive achievement, RateSetter has renamed it as the 100% Fund. These advancements include:
- Comprehensive coverage of current default rates of 0.47%. RateSetter believes any coverage below 150% is putting lenders at risk; it currently has over 180% coverage of likely borrower defaults and is due to hit 200% in 2014.
- A RateSetter Credit Committee to monitor borrower defaults in real time, which can vary borrower levies to bolster the 100% Fund if the overall default rate increases.
- 360 degree credit checks. New affordability, fraud, identity and third-party lender checks of its potential borrower-base in addition to industry standard credit checks.
- Immediate return of funds to lenders in the event of a borrower default. Swift repayments unlike secured lending.
- A Resolution Event to be activated if the 100% Fund is depleted, distributing pooled borrower repayments to lenders.
- A Fully Funded Run-Off Plan, approved by the regulator, to activate in the very unlikely event RateSetter ceases to trade. It will rapidly match borrower repayments with lenders via a segregated fund platform.
Rhydian Lewis, founder and CEO of RateSetter, said: “Our stunt highlighted a critical issue. We are at a cross roads in the P2P industry following regulation by the Financial Conduct Authority, but we need to move far beyond this if we are to put any saver anxiety over our sector to rest. As a recognised, regulated sector, savers and borrowers will continue to turn to P2P as a flexible and hassle-free alternative to the banking industry. But the individual platforms must go further to protect savers if the reputation of the industry is to flourish in the years to come.”
“With so many new entrants to the market offering negligible security to savers, we must draw a line in the sand now and call for all P2P players to step up their game to ensure our sector’s longevity. We need to provide an adequate level of safe, easily accessible funds if the sector is to attract the same numbers of savers as borrowers. Carefully vetting who is borrowing through our platforms is central to this.”
“Let customer protection be the lynchpin of our industry at this crucial time in our development. Everyday savers will ask for nothing less and we must rise to the challenge.”
Joe Levey, a RateSetter saver, added: “RateSetter recognises the fact that customer protection must be at the heart of P2P. The 100% Fund is testament to this and ensures that savers are fully protected from any potential borrower defaults. It is the reason why I am confident to put my money into the platform, and the characteristic that will continue to attract Britain’s hard-pressed savers!”
Recent figures released by the P2P Finance Association, of which RateSetter is a founding member, show there has been a dramatic uplift in borrowers in the P2P sector between January and March this year: they have risen by 17%, compared to a 5% rise in savers.
RateSetter took the crown of the largest peer-to-peer lender in the UK by the amount of new loans originated for the first time in March, with total inflows of £21,105,355. Its business grew at 219% in 2013 compared to overall sector growth of 107% (NESTA, Dec 2013), making it the fastest growing major peer-to-peer company in the UK.
RateSetter’s unique approach has led to widespread industry and customer accolades, with the company winning MoneyNet’s 2014 award for Best Peer-to-Peer Savings Provider, Credit Today’s 2013 award for Alternative Lender of the Year and Moneywise’s 2013 customer voted award for ‘UK’s Most Trusted Loan Provider’. RateSetter is also the most highly rated personal loan provider in the UK according to ReviewCentre.com, the leading independent UK consumer review site, with 99% of 619 customers saying they would recommend RateSetter to others – the highest of any financial service provider.