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Zopa to drop C and Y markets
Zopa announced yesterday that they will be dropping the "C" and "Y" markets from October. The "C" markets are the highest risk category that Zopa currently caters for with estimated bad debt rates between 4.2% and 5.2% per annum. The top of the "C" market will be integrated into the "B" market, with the remainder falling outside the scope of Zopa.
The "Y" markets are for borrowers between 20 and 25 years of age. These markets are also currently regarded as higher risk with estimated bad debt rates between 3.1% and 5.0% per annum. The "Y" market be integrated into the remaining "A*", "A" and "B" markets, with the possibility that some would not meet these criteria.
There will also be a change to remove the option to opt-in to receiving a rapid-return loan.
Here is the full statement from Zopa:
We are making improvements to the Zopa Markets and how we group the UK's safest borrowers, to make it easier for lenders like you to set their rates and make great returns.
What improvements are being made?
1. The Y market
This market is where we group young borrowers aged 20-25, who have a great credit rating and a sensible approach to money. We are going to move them into the A*, A or B market so they are grouped more fairly based on their credit rating, rather than just their age. As such, this will not affect the bad debt estimate in each market.
This will also help attract safe, young borrowers to Zopa and, as many of our lenders enjoy helping young people to buy their first car, you will be able to look at the age of your borrowers in your loan book.
2. The C market
Due to our careful checking, we only accept a very small number of borrowers in the C market. This means only a small amount can be lent to C borrowers and lenders tend to offer lower rates to compete in this market.
To help lenders get better rates, and having received feedback that managing rates across so many markets is time-consuming, we are going to remove the C market. We will accept only the highest rated C borrowers into the B market. These borrowers behave like B borrowers and will not affect the bad debt estimate of this market.
3. Accepting Rapid Return loans
To make it simpler to set up and manage lending offers, we are removing the tick box about accepting Rapid Return loans. All lenders will be eligible to take loans transferred via Rapid Return, which may offer a higher rate and do not have any missed payments.
When will this happen?
In October we will no longer have C and Y markets and they will be removed from your lending offer. You will continue to offer to the other markets as before, and you will still be able to see your existing loans to C and Y market borrowers in your loan book.
What do you need to do?
As the bad debt expectation in A*, A and B markets will not change you do not need to do anything. However it's always a good idea to review your rates regularly to make sure you are lending money and getting a good return.
Following on from the demise of listings, the removal of the "C" and "Y" markets will reduce the risks to lenders still further as Zopa positions itself to focus on only the best and least risk borrowers.