From bounce back loan fraud to platform closures and loan book purchases, there were plenty of big stories to chew on in 2021.
But what were the most-read news reports on Peer2Peer Finance News? Read on for our top 10 most-read stories of the year…
As early as March 2021, we were asking when Funding Circle would re-open to retail investors, and nine months on we still don’t have an answer.
Funding Circle paused retail lending on its platform in April 2020 in order to focus on delivering government-backed lending schemes such as the coronavirus business interruption loan scheme (CBILS). When CBILS came to an end, Funding Circle was quickly approved to distribute the recovery loan scheme (RLS), and the platform recently said that it will not consider re-opening to retail until the RLS comes to an end in June 2022.
One of the more dramatic platform closures of 2021 came in mid-March, when car leasing provider Buy2Let Cars went into administration. It quickly emerged that the company – which specialised in leasing new cars to key workers such as NHS nurses – had been trading while insolvent for years.
A fraud investigation was subsequently opened into Buy2Let Cars’ parent company Raedex Consortium, and in April, the Serious Fraud Office made an arrest in connection with the case.
In October, a suspect linked to the case was arrested by Surrey Police after the Serious Fraud Office determined that he intended to leave the UK.
There was a lot of hype around the government’s green bonds in the early part of 2021. Chancellor Rishi Sunak used his March Budget to announce plans to raise £15bn through a green gilt framework by the end of the current financial year.
When the first bonds were finally issued in September 2021, they were almost 10x oversubscribed. However, investors were left disappointed by the less-than-competitive fixed rates of 0.65 per cent over three years.
When the bounce back loan scheme (BBLS) was introduced, the aim was to deliver emergency funding to small- and medium-sized enterprises (SMEs) as quickly as possible as the country went into its first Covid-19 lockdown. But it wasn’t long before questions were being raised around the due diligence checks (or lack thereof) which accompanied the BBLS distributions.
By February 2021, fears of BBLS fraud were reaching a fever pitch and the Association of Accounting Technicians called for the Treasury to write off all legitimate bounce back loans paid to SMEs, stating that this would be of greater long-term benefit to taxpayers given the number of defaults predicted.
Metro Bank completed its acquisition of RateSetter in late 2020, but in early 2021 the bank announced that it was going to purchase RateSetter’s remaining loan book. All of RateSetter’s P2P investors would have their money repaid, and all P2P accounts were permanently closed on 2 April, with all invested money returned to investor holding accounts.
Property lender The House Crowd went into administration in February 2021, and it wasn’t long before the rumour mill kicked into gear.
In May, the House Crowd’s founder and chief executive Frazer Fearnhead spoke exclusively to Peer2Peer Finance News to deny allegations that he had taken an unauthorised loan from the company after an administrator’s report cited the matter as a “conflict of interest” that played a part in the platform’s collapse.
Fearnhead confirmed that a loan was made to him in 2019 for around £390,000 and that “it was secured in accordance with the published underwriting policy at the time. Though that policy later changed.” He said that by February 2021, £315,000 had already been repaid and was due for redemption at the end of February.
Default rates are a key marker for P2P lending platforms, but there is still no standardised definition of a default within the industry.
Trade bodies and regulators vary in their definitions, from 120 days to 90 days. Meanwhile, some individual platforms will declare a loan to be in default the moment that a payment has been missed, while others will wait for 30, 60 or 90 days before declaring a default.
During the P2P Investing Summit, a virtual event hosted by Peer2Peer Finance News and AngelNews, institutional investors and industry stakeholders called for more standardisation in the way defaults are reported, in order to help investors to make better risk assessments.
After months of campaigning, the Chancellor finally announced a follow on to the CBILS and BBLS schemes. The RLS was announced in March 2021 and it is still in force today, with an extended end date of June 30 2022.
However, only two P2P lending platforms – Assetz Capital and Funding Circle – have been authorised to distribute RLS funds to date.
Less than a year after launching a series of government-backed Covid support loans, the British Business Bank began to investigate suspected cases of fraud. At one point, the Office for Budget Responsibility was projecting that up to £30bn could be lost to defaults from lending schemes such as CBILS and BBLS.
The government has opened an inquiry into BBLS fraud, and it is accepting evidence until 3 January 2022. While the exact default figures are still unknown, several arrests have already been made relating to BBLS fraud.
It is interesting that the two most-read stories of the year both focused on the possibility of fraud within the government-backed loan schemes. At the very start of the year, banks began taking action against account-holders who they believed to have committed BBLS fraud, creating an early playbook that alternative lenders could follow as and when they started to identify cases of loan fraud.
As it turned out, the non-bank lenders who took part in the CBILS, BBLS and RLS distributions have yet to report a substantial rise in defaults and loan fraud, in a testament to the robust due diligence that is required across the alternative lending sector.