RateSetter’s wholesale loans have all but disappeared

By Ryan Weeks on Thursday 27 July 2017

Alternative Lending

AltFi Data Analytics shows peer-to-peer lender has stayed true to its word on phasing out wholesale lending.

RateSetter is currently in the midst of a window during which it will offer fee-free sell-outs to its investor base, provided there is sufficient liquidity in the marketplace to allow for it.

The offer has been made because of new details that it published on several of its former wholesale lending partners. Wholesale lending is another way of referring to a loan that is made to a separate lending business, which then lends the money on to its own customers.

RateSetter began winding down its wholesale lending activities in December of last year, shortly before being told to do so by the City regulator.

Two weeks ago the firm’s COO Peter Behrens contacted investors to bring them up to speed with the status of some of its former wholesale partners: Vehicle Trading Group Limited and George Banco. Chief among the strange revelations in the email was the fact that Vehicle Trading Group Limited, a motor finance firm, had used £12m in wholesale funds from RateSetter to lend to Adpod, an advertising company which subsequently got into financial difficulty. RateSetter had elected to use its own balance sheet to absorb any losses incurred on this particular loan on behalf of its investors.

While investors digest this information, it may be comforting for them to know that RateSetter is keeping to its promise of winding up its wholesale lending activities. The chart below shows that wholesale loans had all but disappeared from the platform’s loanbook by June, after declining steadily throughout the year.

While some investors may get the jitters in reaction to RateSetter’s most recent update, it should not be forgotten that the platform is one of the few to have made its full loanbook available for downloading online, in addition to having laid itself bare to third-party scrutiny, to allow for like-for-like comparison with its peers.  

This commitment to transparency is something of a double-edged sword. The numbers can work against the publishing platform, as much as they can work for it. But more important perhaps is the overriding commitment to transparency itself. After all, it’s more than the vast majority of the world's peer-to-peer lenders have done. For those platforms (most of which are smaller), performance is anyone’s guess. 

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