RateSetter Pull Saver Protection Stunt

By AltFi on 16th April 2014

P2P/Marketplace Lending

A very strangely garbed man could be seen traversing the streets of London today, and RateSetter’s market-leading Provision Fund has been renamed as the “100% Fund”. And yes, there is a connection.

RateSetter Pull Saver Protection Stunt

In a stunt designed to highlight RateSetter’s unblemished record in saver protection, the bubble wrap-clad man took on a series of daring feats – much to the puzzlement of passing onlookers. But this light-hearted escapade delivers a serious message. Now that regulation is in place, RateSetter are of the belief that the p2p sector must focus its collective energies on ensuring that no saver ever loses money – even if borrower defaults spike in a souring economy. The platform’s Provision Fund (now renamed the 100% Fund) is the largest in the industry at £4m. None of the RateSetter’s savers have ever lost a penny in spite of over £210m having been lent through the platform by some 11,500 people.

The “100% Fund” has received a number of alterations alongside the name-change. These include:

  1. Comprehensive coverage of current default rates of 0.47%. RateSetter believes any coverage below 150% is putting lenders at risk; it currently has over 180% coverage of likely borrower defaults and is due to hit 200% in 2014.
  2. A RateSetter Credit Committee to monitor borrower defaults in real time, which can vary borrower levies to bolster the 100% Fund if the overall default rate increases.
  3. 360 degree credit checks. New affordability, fraud, identity and third-party lender checks of its potential borrower-base in addition to industry standard credit checks.
  4. Immediate return of funds to lenders in the event of a borrower default. Swift repayments unlike secured lending.
  5. A Resolution Event to be activated if the 100% Fund is depleted, distributing pooled borrower repayments to lenders.
  6. A Fully Funded Run-Off Plan, approved by the regulator, to activate in the very unlikely event RateSetter ceases to trade. It will rapidly match borrower repayments with lenders via a segregated fund platform.

Rhydian Lewis, Founder and CEO of the platform, commented:

“Our stunt highlighted a critical issue. We are at a cross roads in the P2P industry following regulation by the Financial Conduct Authority, but we need to move far beyond this if we are to put any saver anxiety over our sector to rest. As a recognized, regulated sector, savers and borrowers will continue to turn to P2P as a flexible and hassle-free alternative to the banking industry. But the individual platforms must go further to protect savers if the reputation of the industry is to flourish in the years to come.”

“With so many new entrants to the market offering negligible security to savers, we must draw a line in the sand now and call for all P2P players to step up their game to ensure our sector’s longevity. We need to provide an adequate level of safe, easily accessible funds if the sector is to attract the same numbers of savers as borrowers. Carefully vetting who is borrowing through our platforms is central to this.”

“Let customer protection be the lynchpin of our industry at this crucial time in our development. Everyday savers will ask for nothing less and we must rise to the challenge.”

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