ZOPA’S winding-down safeguard fund is now covering just £75m of loans, as the peer-to-peer lender warns that provision funds create a “false sense of security”.
Zopa closed its safeguard fund to new loans in December 2017 and said while there is just £1m to cover the old portion of its loanbook, it is still funded by fees paid by borrowers.
Zopa said the fund paid out £4.2m in 2019 and it expects this number to continue to fall as the loans approach maturity.
“The number of safeguarded loans continues to fall as more and more reach maturity,” Zopa said.
“The value of outstanding loans covered by the fund stands at £75m. These loans should have all reached maturity by December 2022.
“All loans in the safeguard fund are now at least two years old. This means they have a track record of repayments. At this point in a loan’s life cycle we tend to see fewer defaults.”
It comes after The Times reported earlier this week that Zopa’s safeguard fund was running dry.
The platform has since said it has no plans to bring the safeguard back, warning it provides a false sense of security for investors.
“They are not guarantees but can be mistaken as such,” Zopa said.
“In our view, customers should understand the performance of their loanbook so they can make an informed decision about the underlying asset class they are investing in and the level of risk and return.”