Funding Circle has defended the sale of 280 small business owners’ loans to a debt buyer which is owned by US-based asset manager Elliott Management, following criticism that the lender’s actions were “very worrying”.
In October, the Funding Circle SME Credit Realisation Fund – which is now in the process of winding down – sold the bundle of defaulted loans to Azzurro Associates, an FCA-regulated practitioner which is owned by Elliott Management.
Peer2Peer Finance News understands that all loans went into default before the start of the pandemic, and the borrowers involved were notified by both Funding Circle and Azzurro shortly after the sale.
MP Kevin Hollinrake, co-chairman of the All Party Parliamentary Group on Fair Business Banking, described the proposal as “very worrying” in a collections context.
Goodbody analyst John Cronin added that “a personal guarantee is hybrid equity, and such arrangements should not be entered into without due consideration on the part of the borrower.”
Funding Circle said that the loans represented a small fraction of the peer-to-peer lending platform’s overall loan book, and pointed out that all struggling borrowers are offered support including short-term payment plans.
It is understood that the loan sale was completed after a significant amount of time was spent carrying out due diligence measures to ensure that Azzurro’s code of conduct was in line with Funding Circle’s own guidelines.
“In October, the SME Credit Realisation Fund completed a small sale of loans that defaulted pre-Covid to Azzurro Associates, an FCA-regulated practitioner, which represented approximately 0.07 per cent of the loans under management at Funding Circle,” said Lisa Jacobs, Funding Circle’s Europe managing director.
“We have a dedicated team at Funding Circle who work hard to support small businesses if they are experiencing difficulty, including offering short term payment plans.”
Elliott Management is one of the largest hedge funds in the world, with assets under management of approximately $40bn (£30.04bn). It was founded by billionaire financier Paul Singer, who gained notoriety for his practice of buying cheap sovereign bonds – most famously in Argentina – and then going after countries for unpaid debts.