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The UK’s First Property-Backed Consumer Loans Arrive

The UK’s peer-to-peer consumer lending space is due a couple of innovative new entrants.

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The sector is home to two of nation’s largest alternative finance providers – RateSetter and Zopa. In sharp contrast to the SME funding space, where the market leader Funding Circle is being pursued by a number of high growth challenger platforms, there’s been a relative dearth of activity behind this pair of powerhouses. But that may not be the case for much longer.

eMoneyUnion is now exiting a period of BETA testing during which the platform channeled upwards of £600k to UK consumers. As the headline suggests, eMoneyUnion is the only peer-to-peer platform in the world to offer consumer loans that have been secured against property. The platform has flown somewhat under the radar up to this point due to a number of regulatory issues that have now been resolved. With everything seemingly poised for an explosive 2015, we caught up with Lee Birkett – Founder of the platform – to learn more.

Lee, could you please give us a very brief introduction to eMoneyUnion?

eMoneyUnion is the UK's only Peer to Peer platform serving personal borrowers who are excluded from the mainstream; so I suppose you could say we are the UK's "Niche P2P loan platform". In addition to being unique, we are the only platform in the world to be owned by the crowd; following our oversubscribed £427,000 equity crowdfunding raise earlier in the year from 100 private investors.

How have things been going so far?

The response from lenders and borrowers has been fantastic, we have hit a few regulatory speed bumps in the road and these are now behind us. What we are doing here at eMoneyUnion is so innovative and new that the speed of development is mind blowing.

What is the platforms cumulative lending figure to date?

During our BETA testing we have lent £640,000 to 76 borrowers across 5 asset classes; secured 1st charge, secured 2nd charge, personal guarantor, unsecured and vehicle HP. Every loan completed is displayed on our eMarketPlace.

Is eMoneyUnion the first platform to offer secured consumer loans?

As far as we are aware, we are the first to secure a Peer to Peer loan against a person’s home. There are a number of commercial peer to peer platforms but we are the only consumer platform originating consumer secured loans.

What effect does the presence of security have on the platform's interest rates?

I would say on average it will dramatically reduce a typical borrowers rate, as our borrowers are financially excluded due to low credit score, problems in the past, self employment or elderly. These borrowers are trapped in an overly expensive High Cost Credit area whereby credit is in the 100's and 1000's. Our secured loans do not go over 30% and will average 18%.

Tell us about the regulatory issues surrounding your product – I believe there's been some confusion around the differences between what you're delivering and traditional mortgages?

As mentioned earlier, we are in a regulatory world and, quite correctly, the regulators need to ensure that our activities result in a positive outcome for those using our services.  As everything we do at eMoneyUnion is customer centric, loans are only presented to our lenders if it's in a consumer’s interest. The regulator has handled the pay day debacle brilliantly and clearly defined 2 regulatory risk profiles for lending activities, HCST or High Cost Short Term Credit, i.e. pay day and door stop lending is a High Risk Activity, this is defined as interest rates in excess of 100% APR and loan terms shorter than 12 months. eMoneyUnion do not operate in this loan profile space, therefore our lending activities are not High Cost/High Risk.

eMoneyUnion features a secondary market - can you give us an update on that? How liquid is it?

A Secondary Market is critical for the proposed tax free peer to peer ISA regime next year, and this is a proposal under consultation with HM treasury. To be eligible for ISA platform accreditation, a lender/saver needs to be able to liquidate their holdings, without an open market to trade I can't see a platform being eligible to offer tax free lending. At the moment approximately 10% of our loans are traded on the platform, with lenders exiting and buying as and when they desire.

Finally, I understand that you currently have some "skin in the game" in terms of the platform's lending. Is this the case for all loans facilitated by eMoneyUnion? If so, what percentage of the loan do you take on board? Is this practice sustainable as the platform scales?

Not all loans, only loans that struggle to get over the 100% funded line, interestingly the lower risk/lower yield loans. We have an FCA licensed lending subsidiary at eMoneyUnion that lends alongside the crowd and we have a model where our profits come from each loan repayment made as opposed to being reliant on day 1 transaction fees.

We would not have been able to prove the model without having skin in the game and doing so shows our commitment to our underwriting process. We are in advanced discussions with a number of parties to either fund via the lending subsidiary or directly onto the platform to scale the platform next year, we do not have the pockets to fund our growth plans, hence the advanced discussions for 2015 explosive growth.

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