By Daniel Lanyon on Tuesday 7 April 2020
The coronavirus outbreak has severely impacted the UK economy, particularly the credit and financial markets, and so the peer-to-peer platform has responded with a set of new rules aimed at sustainability.
P2P lending platform Lending Works will not accept any new investments, is suspending the use of the secondary market and not issuing any new retail investor funded loans owing to continued pressure placed on the platform.
In a letter to investors seen by AltFi, Lending Works’ CEO Nick Harding says as a result of the COVID-19 crisis the platform’s revenue has dropped from approximately £0.75m per month to near-zero and therefore is pausing new retail investor signups and existing investors' access to loans is necessary.
The move will last for 90 days. However, it may be extended if "there is still such material uncertainty in the economy - for example, if the government's social distancing restrictions continue to be in force," the letter said.
"We want to highlight that we have not taken the decision to enter into a Normalisation Period lightly, and we have explored all other possible options to avoid it."
“We understand that this step might cause you concern. We want to emphasise we have done this to protect your investment. By introducing these measures we can ensure that the platform continues to function as expected during these extraordinary times and when the Normalisation Period has ended we, and the rest of the world, will have a better understanding of the long-term effects of coronavirus on the economy.”
“This shock to the economy has caused great concern to all lending firms, including Lending Works, resulting in additional support being extended to borrowers, payment holidays being offered to eligible loan customers, credit models being significantly tightened and credit risk teams working hard to understand what medium and long-term impacts this crisis is going to have on credit performance.”
Harding said also that 7 per cent of our retail investor customers have recently requested early access to funds using its secondary market "within a very short space of time."
"Due to the current state of uncertainty, it has become extremely difficult to effectively assess customers' creditworthiness and affordability. This has clearly placed an unsustainable strain on the platform."