Peer-to-peer platform Lending Works has extended its ‘normalisation period’ for another 90 days, as borrowers request more time to make their payments.
The initial ‘normalisation period’ was introduced in early April in response to the coronavirus pandemic. It was due to end after 90 days, in early July.
However, in a note to investors Lending Works said the ‘normalisation period’ will continue until October, so that the platform’s borrowers can continue to access payment holidays and deferrals where needed.
“The social world is slowly easing back to normality, but the financial world is far from it,” Nick Harding, chief executive of Lending Works, told Peer2Peer Finance News.
“We have eight per cent of our portfolio on payment holidays and exiting the normalisation period during a time when you have more than 1,200 lenders on a payment holiday would be a very dangerous move because we don’t yet know what is going to happen economically.
“We felt that with all of the uncertainty, the most prudent thing to do was to stay in the normalisation period.”
Earlier today (1 July), the Financial Conduct Authority (FCA) confirmed additional consumer credit support, which included a mandate for lenders to either extend their payment deferral periods for an additional three months to loan customers who have had already a payment deferral, or to accept reduced payments instead.
Harding added that Lending Works would take its cue from the regulator, and would be prepared to extend the ‘normalisation period’ again, pending FCA advice.
“We do feel that by the end of September we’ll be exiting the normalisation period,” said Harding. “But it really depends on what the FCA does – if they push the payment deferral rules for another three months, then so will we.”
During the ‘normalisation period’, Lending Works will not be taking on any new retail investors, and will not be accepting any new investments onto the platform from new or existing customers. Its secondary market has been suspended, and it will not be issuing any more retail-investor funded loans.
In the lender update, the platform told investors that fewer loan consumers were requesting their first payment deferrals in June, compared to the previous months. However, the platform has begun to receive extension requests from customers who are unable to resume payments at the end of their first payment deferral.
“In the last few months, we have continued to focus on helping loan customers that have suffered financial distress and ensuring that we are fully aligned to the regulatory guidance,” read the update.
“We have decided to extend the normalisation period for an additional 90 days as the full impact of Covid-19 on our portfolio performance remains difficult to predict at this stage, and economic uncertainty remains material.”