RateSetter, a leading UK peer to peer lending platform, has completed the sale of £2.1 million of non-performing debt. RateSetter sold the assets t 1st Credit, a debt purchaser. Exact terms of the transaction were not revealed but RateSetter said it was the first transaction of its kind for a UK peer to peer lending platform.
The non-performing loans were written between 2010 and 2015. RateSetter said it believed there was a low chance for them to collect on the assets. RateSetter said that typically in these situations they have not been able to contact the borrower for a long period of time, or where it has not been possible to put in place a debt management plan with the borrower.
RateSetter is a peer to peer lender that maintains a Provision Fund that is made up of risk-weighted borrower contributions. In the event of a missed payment from a borrower, the Provision Fund steps in to ensure that the investor receives his or her expected capital and interest. If a borrower defaults, the Provision Fund takes ownership of the loan and begins a recovery process, making every reasonable effort to restart payments.
Ryan Marais, Operations Manager at RateSetter, said his platform has achieved very low default rates but when a loan does not perform they do everything they can to collect. Marais said they aim to maximize recoveries for the Provision Fund and have a strong track record of making recoveries ourselves.
“We undertook this debt sale to secure some value for the Provision Fund from loans where we’d exhausted the other options available to us. We always strive to ensure that RateSetter borrowers are treated fairly and that is why we specifically chose to partner with 1st Credit as they are a progressive, responsible debt purchaser.”
The value of the Provision Fund is in excess of £20 million and is thus sufficiently capitalized to offset any losses. RateSetter states that their investors have never lost any money but cautions this is not a future guarantee.
The proceeds of the debt sale have been paid into the Provision Fund, and are reflected in a small reduction in the Provision Fund usage for the years 2010-2015, which can be seen at www.ratesetter.com.