RateSetter withdraws from the Peer to Peer Finance Association

By AltFi on Friday 18 August 2017

Alternative Lending

RateSetter has withdrawn from the P2PFA despite being a founding member.

RateSetter has withdrawn from the Peer to Peer Finance Association after breaching its transparency rules. 

RateSetter has pulled out of fintech's leading industry group, the Peer to Peer Finance Association, after it was found to have breached its transparency rules. 

The decision comes despite RateSetter being a founding member and one of the biggest British P2P lenders.

"We have decided to withdraw from the P2PFA," said RateSetter in a short statement on its website.

"No customer has experienced any loss from our actions but we recognise that [we] breached the principles of the Association.”

The breach came when RateSetter's wholesale loans to three companies started failing.

Chief among those was Adpod, a now-bankrupt subsidiary of the Vehicle Trading Group, to which RateSetter had lent £12 million. RateSetter chose to absorb Adpod's losses and acquire a controlling stake in the company instead of using its provision fund - a pool of money it uses to shield its lenders when borrowers default - but failed to share this information immediately. 

In a statement, the P2PFA said it respected RateSetter's decision to leave. 

The announcement comes the day after the offer of a free sell-out for the platform’s investors expired.

Commenting on the withdrawal, Rupert Taylor of AltFi Data said provision funds can make it harder to assess how loans are performing.

“Wholesale lending relationships and the use of a contingency fund [can obscure] the performance of the underlying loans, making it harder to understand the risk associated with the returns being delivered," he said.

"There are gradations of disclosure and at AltFi Data are working hard to help all platforms provide information to the market in a manner that delivers a sufficient level of scrutiny."

"We believe that standardised and verified metrics, based on fully transparent loan level data, allows investors to meaningfully appraise both risk and return. By improving visibility and comparability across the market investor participation will continue to broaden and develop, as evidenced by recent confirmations of increasing institutional investor participation."

EDITOR'S NOTE: This article was amended on 20/08/2017. 

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