Funding Circle’s sale of a book of bad debts is set to return around £16m in a matter of days, benefitting approximately 90 per cent of individual investors on the platform.
In October, the Funding Circle SME Credit Realisation Fund – which is now in the process of winding down – sold a bundle of 280 defaulted loans to Azzurro Associates, a debt buyer which is owned by US asset manager Elliott Management.
The sale was met with criticism from analysts and MPs due to concerns around how it would impact the collections process.
The peer-to-peer lending firm defended the sale of the loans, saying they represented a small fraction of its overall loanbook, and pointed out that all struggling borrowers are offered support including short-term payment plans.
Peer2Peer Finance News understands that investors will be able to withdraw these funds from their accounts within the next business day, rather than incrementally over the remainder of the recovery process.
“This sale brings forward recoveries for retail investors, benefitting over 90 per cent of customers that have lent through the platform,” said Lisa Jacobs (pictured), Europe managing director of Funding Circle.
“Azzurro Associates is FCA regulated and as the first commercial debt firm to join the Lending Standards Board, we are confident they will continue to service these borrowers with the equivalent level of service and care.”
It is thought that Azzurro Associates will recover any outstanding debt from the business and business assets before attempting to recover from the personal assets of a guarantor, which was a concern that had been raised by MP Kevin Hollinrake, co-chairman of the All Party Parliamentary Group on Fair Business Banking.
Azzurro Associates is said to be contractually obliged to provide the equivalent level of care as Funding Circle.
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 Associates shortly after the sale.