Is peer-to-peer lending regulated?
Peer-to-peer (P2P) lending has been regulated by the Financial Conduct Authority (FCA) since April 2014. For the full regulatory regime set out for crowdfunding and P2P lending, download the FCA’s review below.
Is LendingWell regulated?
LendingWell Limited is an Appointed Representative of Gallium Fund Solutions Limited, which is authorised and regulated by the Financial Conduct Authority (no. 0663450). Lending through LendingWell is not covered by the Financial Services Compensation Scheme. Company registered in England (Co. No. 09973730) with its registered office at Suite 48 88-90 Hatton Garden, London, United Kingdom, EC1N 8PN.
Who can invest with LendingWell?
You must be aged 18 years and over, a UK resident and pass an appropriateness test ensuring you have the knowledge and experience to understand the risks of lending.
What is the minimum investment?
What types of loans will I be investing in?
P2P platforms offer exposure to a range of sectors and sub-sectors of the market including secured and unsecured SME loans, secured and unsecured consumer loans, property-based debt and other asset-backed finance products.
You can either choose one of our model portfolios, each offering investors a diversified pool of loans tailored to a particular risk appetite, or you can use our Product Finder to select your own investments – ‘self-select’.
What are the risks involved in direct lending investments?
The biggest underlying risk to investors is credit risk. This is the risk that the borrower will not be able to meet timely principal and/or interest repayment obligations, which may result in a default. There are a number of other risks that are important to understand before investing. Please see our risk management page for a comprehensive list.
How is risk managed?
LendingWell’s three-way diversification allows investors to spread risk across a range of products, sectors and platforms. Each fund we list on our Product Finder has passed a rigorous selection process, reducing the risk to an appropriate level for target return. Please see our risk management page for more information about our approach to risk and for a full list of fund selection criteria.
Why is diversification important in portfolio management?
Different asset classes (equities, bonds, commodities and real estate) behave differently depending on prevailing economic and market conditions. It’s therefore crucial for investors to diversify in order to mitigate the effect of an asset class performing poorly. P2P assets have low correlation with other traditional asset classes, offering investors a potentially attractive method of portfolio diversification.
How do I transfer funds into LendingWell?
Registered LendingWell members can transfer funds to LendingWell by Direct Debit, bank transfer or standing order. [More details to follow]
What is a contingency fund?
Several LendingWell partner platforms provide a discretionary contingency fund to provide investors with a safeguard against things like:
- Payment delays of capital and/or interest repayments
- Shortfalls in interest received from the borrower
- Losses in the event of loan default
Zopa, Assetz Capital, LendingWorks and Landbay provide contingency funds to investors. The fund is by no means a guarantee against loans in arrears or default and your capital is at risk.
When is a borrower’s loan classified in arrears or defaulted?
The P2PFA, the UK’s leading industry trade body for marketplace lending, was pioneered by some of the leading platforms in order to establish industry reporting standardisation. Platforms that are currently members include Funding Circle, Landbay, Lending Works, LendInvest, MarketInvoice, RateSetter, ThinCats and Zopa.
The following definitions are applicable to member platforms:
A loan should be considered to be a ’Non-Performing Loan’, ‘Impaired’ or in ‘Arrears’, where the relevant borrower of the loan is:
(a) more than 45 days overdue in an interest payment; or
(b) more than 45 days overdue with a principal repayment; or
(c) legal action for enforcement of the loan has commenced; or
(d) the loan is being or has been renegotiated with a borrower, or
(e) the loan has not otherwise been in full compliance. The amount of arrears is the amount overdue for payment in a) and b) above.
A capital loss should include:
(a) any portion of a loan that has not been repaid, 120 days following the original loan repayment date;
(b) all costs incurred by the lender in relation to the enforcement of a Non-Performing Loan, where such costs are not recovered in full from the relevant borrower;
(c) any loan amount where there is a reasonable expectation that the borrower is not going to repay the loan on the original loan repayment date (ie the borrower has gone bankrupt etc).
What happens when a borrower’s loan is classified in arrears or defaulted?
It is important to realise that in P2P lending, defaults are inevitable and your capital is at risk. However, prudent credit underwriting and a well-diversified pool of P2P assets go a long way to mitigate default risk.
The procedure once a loan is classified as late or defaulted varies between LendingWell’s partner platforms. Contingency funds, asset-backed security and insurance are some of the forms of investor protection that have been adopted in the industry to minimise permanent loss of investor capital when a borrower is no longer able to meet contractual repayments.
What is LendingWell’s debt management process?
LendingWell’s risk management framework ensures only platforms that have clearly demonstrated high standards of bad debt management are put forward to our investors. Please visit our Risk Management page for further information on our selection criterion. LendingWell’s partner platforms are responsible for the end-to-end servicing of loans.
Are loan products on LendingWell secured?
P2P lending products may be secured or unsecured. In the event of default, platforms dedicated collections and recoveries teams closely engage with borrowers to gain an in-depth understanding of the situation and to provide a short period in order to correct the default.
However, if the borrower fails to meet the platform’s conditions then court proceedings will ensue where security has been provided as collateral.
The type of security offered will vary by loan and originator platform. In the event of borrower default, a first legal charge provides the lender with the right to sell the asset to recoup losses up to the amount of the debt which the charge secures. The difference in equity which remains after the value of the first charge loan may be used for second legal charges. Debentures, a charge over the assets of a company, are widely accepted as a necessity for business lending arrangements and this may the case where security over property alone is not sufficient. A personal guarantee may also be requested which provides lenders with security over specific personal assets, or security over all of the assets in the business.
Is advice to invest in P2P lending covered by FSCS?
From 6th April 2016, the Financial Services Compensation Scheme (FSCS) may be able to compensate eligible investors upto £50,000 in relation to unsuitable advice they receive about the merits of investing in peer-to-peer loans. Please click here to view the list of criteria a P2P advice claim would have to meet.