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Zopa tweaks borrower fee structure
Zopa has confirmed today that it has tweaked the fee structure it charges borrowers. Previously Zopa charged all successful borrowers a fixed fee of £130, however it has raised this fee in the B, and C and Y markets to £150 and £200 respectively. In addition this fee has been increased in the A and A* markets to £160 for loans of £3000 to £3499. However this fee has been reduced in the A* market to £80 for loans of £7000 to £7499, £20 for loans of £7500 to £12,999 and £30 for loans £13,000 and over. This is detailed on P2P Money's page on peer-to-peer companies.
Giles Andrews, CEO of Zopa stated on the Zopa forum:
Interesting comments. We are trying to boost borrower volumes while maintaining our average fee. So far we have been more successful at the former than the latter as our average borrower fee has fallen. I don't particularly like charging B,C and Y borrowers more, but 1) we need to in order to run the promotional rates in A*, which have driven higher volumes and 2) it reflects the much higer processing costs we incur in these markets, where we have to process a significant multiple of applications more (so we both buy much more data and spend longer reviewing them) for every successful disbursal, and the time spent underwriting each case is also significantly higher. It certainly doesn't reflect a desire to close these markets. In fact, we haven't seen a reduction in the number of applications in these markets since the change, indicating it makes business sense, even if their proportion has declined. Interestingly both the US P2P players have much larger differentials in fees for their higher risk markets.
Lower fees for larger loans also make sense as the total value of a loan, including the future lender fees associated with it, increases with loan size. The vast bulk of loans over £7k are in the A and A* markets - the distribution is even more skewed than for smaller loans.
Finally, the new fee structure isn't set in stone and we will be tweaking it as we learn, in pursuit of the objectives I set out at the beginning of this post.
I'm slightly puzzled by the increase in the A* market for loans of £3000, but the reduction to £20 for loans of £7500 clearly demonstrate that Zopa are trying to raise the average loan size which would be good news for lenders. The interest rate for an £8000 loan over 36 months for an A* borrower has decreased to 6.1% APR.