SAVING Stream has apologised for failing to inform investors that one of its borrowers has gone into receivership.
The peer-to-peer lending platform has appointed receivers on a £455,000 loan, but did not inform its investors, according to a report in The Times.
The news will come as a blow to the P2P industry, which is trying to improve trust and understanding among consumers in the wake of negative comments from high-profile figures such as Lord Turner and Treasury select committee chair Andrew Tyrie.
Lendy, the company behind Saving Stream, said it was sorry for the “short but unavoidable delay in informing investors of the status of the loan”.
Saving Stream has lent over £200m to date for short-term bridging loans to property developers, secured against UK property.
It blamed the delay on its legal advisers, saying that they had not received final approval to notify investors.
The loan, which was funded by 925 investors, is secured against a farm in Somerset. The director of the entity is a former bankrupt with a number of failed companies behind him, according to The Times.
Lendy had previously told investors that the borrower’s background was “not relevant” to his ability to repay the loan.
“We have taken this step proactively in order to protect the interests of investors in this loan,” said a Lendy spokesperson. “Lendy Ltd will pay the agreed interest to investors in this loan until the sale of the property is complete.”
Industry commentators have speculated that default rates among P2P platforms will inevitably rise as the sector expands and takes on more debt.
So far, the UK P2P sector has not seen a scandal on a par with that of Lending Club in the US, which saw its share price plummet after allegations of mis-sold loans.
However, Bill Kassul, investment manager at P2P-focused fund Ranger Direct Lending, recently told Peer-to-Peer Finance News that the Lending Club debacle has been good for business, as platforms who previously refused to comply with Ranger’s criteria are coming back to the negotiating table.