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Peer2Peer Finance News | September 18, 2019

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RateSetter clarifies types of lending

RateSetter clarifies types of lending
Suzie Neuwirth

NEW MONEY invested through RateSetter’s platform may be matched to existing wholesale loans, the firm said on Friday.

The ‘big three’ peer-to-peer lender announced in late 2016 that it was winding down its wholesale loan book as the activity may be in breach of regulations.

“We no longer write new wholesale loans and existing wholesale loans are running down as they repay over time in accordance with their schedule,” said RateSetter in its updated principles of lending document. “However, please note that newly-invested lender money may be matched to existing wholesale loan contracts if an existing lender has sold out.”

In February 2017, the City regulator wrote to the chief executives of all P2P platforms urging them to take action if they were lending to other lenders that did not have the required permissions.

RateSetter fully acquired two former wholesale lending partners and bought a stake in another one earlier this month, so that it could still lend to the firms’ customers without flouting the rules.

It said it still has outstanding finance of £32m in total with guarantor personal loan provider George Banco, in which it bought a stake, and £38m in total with its newly-acquired motor finance specialists Vehicle Stocking and Vehicle Credit.

Read more: RateSetter’s Peter Behrens joins George Banco board

“These borrowers generally have a higher credit risk than our existing direct borrowers,” said the ‘big three’ firm.

“To manage this risk, they will pay an appropriately higher amount into the provision fund.”

The platform said that deciding to wind down its wholesale lending in late 2016 had brought a number of advantages.

“It…removes the risk of lending large amounts of money to any single borrower,” RateSetter said. “Although we closely monitored the wholesale platforms, there was some risk that one could get into financial difficulties of its own, or may lend to borrowers that do not meet our strict criteria.” 

Earlier this month, RateSetter upgraded its data disclosure on its loan book and expected losses, which independent P2P research firm 4th Way heralded as “top-tier” transparency.