RATESETTER has defended its provision fund following a report that the contingencies put in place by peer-to-peer lenders risk running dry.
The Times reported on Saturday (11 January) that the contingency funds put in place by Zopa and RateSetter are at risk of not having enough money in place to cover estimated losses.
Zopa closed its provision fund for new lending in December 2017 but said it has budgeted for future contributions for old loans.
The Times warned that RateSetter’s provision fund only has £9.9m left in it despite forecasting £27m of losses for 2019.
However, RateSetter said these figures ignore future payments that come into the fund from loan fees and that the level of defaults may change and some loans could be repaid early.
“We are pleased that an article is focusing on how P2P platforms manage risk,” RateSetter said.
“Something that isn’t mentioned in this article, however, is that the provision fund has a monthly income stream from the loans which brings in money on an ongoing basis.
“This means the provision fund is able to cover all expected future credit losses – this has always been the case over nine years and remains the expectation, although we do not offer a guarantee.
“RateSetter is not a savings product.
“We publish information about the provision fund, its coverage ratio and historic loan performance on our website so people can make an informed decision about the risk and reward of investing.”