On Friday, P2P lending platform RateSetter announced it has withdrawn from the Peer-to-Peer Finance Association (P2PFA). This news comes less than a month after the online lender was hit with a series of significant operational challenges as several large loans have struggled.
RateSetter stated;
“Following our announcement last month, which can be found in the notices section of the member area, we have decided to withdraw from the P2PFA”
As previously reported, RateSetter hit an operational hurdle that culminated several million pounds worth of loans being taken over by the platform. This amount would have outstripped the Provision Fund, a reserve designed to shield investors from poorly performing loans.
The peer to peer lender took over several loan pools including Vehicle Trading Group Limited, VSL and AdPod. The total came in at £48 million. RateSetter admitted that AdPod, a company that recieved £12 million in loans and had £8.5 million outstanding at last report, should not have cleared its internal credit policy. RateSetter has now informed us that another relationship with George Banco actually performed well and has now repaid in full.
RateSetter backstopped the aforementioned loans and expects the loans to be repaid in full over time.
Bruce Davis, Director of the UK Crowd Funding Association (UKCFA), previously issued a statement regarding the RateSetter challenges:
“This underlines why we need clarity from the regulator about the scope of loans based crowdfunding. The UKCFA represents members from loans and investment based crowdfunding and have always advocated maximising transparency for lenders and investors so they have a clear understanding of where their money goes, the risk it incurs and how the rewards are shared between platform and lender. RateSetter have done the right thing to acknowledge their errors but the industry must not lose sight of the benefits of simplicity and transparency.”
The P2PFA commented on the departure of RateSetter simply stating;
“We understand the reasons why RateSetter has withdrawn from P2PFA membership and respect their decision.”
Upon sharing details about the P2PFA departure, the RateSetter said;
“Membership requires adherence to the P2P Finance Association Operating Principles including Transparency. No customer has experienced any loss from our actions but we recognize that our actions breached the principles of the Association.”
Prior to the situation, RateSetter was considered a prominent member of the P2PFA as well as one of the largest online lenders in the UK. Participation in the P2PFA has been viewed a seal of quality due to the strict nature of best practices members must adhere to.