Find out everything you need to know about LendingCrowd.
Peer-to-peer (P2P) lending is where individuals lend money to businesses in return for interest payments and the repayment of capital over time. Online P2P lending firms remove the banking ‘middleman’, meaning that borrowers can benefit from lower interest rates and lenders can receive improved headline rates.
The P2P lending industry has been regulated by the Financial Conduct Authority since 1 April 2014, giving consumers greater protection.
Under the rules administered by the FCA, all information about the P2P platform must be clearly presented and easy to find, as well as easy to understand. The risks of P2P lending must be clearly laid out. P2P firms must have contingency plans in place in case things go wrong and must provide clear information on the specific nature of a P2P agreement. There are also rules requiring the assessment of borrowers for creditworthiness. All comparisons with cash savings account interest rates must be fair and not misleading, as must any promotions.
If LendingCrowd was unable to operate the service, lenders would still continue to receive repayments on loans originated with LendingCrowd, because all loan contracts are between borrowers and lenders and would remain valid. Under Financial Conduct Authority rules, peer-to-peer platforms must appoint a third-party standby servicing company to administer the loan book in the event of the platform ceasing operation.
We have appointed a standby servicing company to oversee the repayment of loans should this situation arise. The standby servicing company is also an ISA manager and would continue to administer loan holdings held in a LendingCrowd ISA. All lender funds are held in a separate client money bank account and don’t form part of LendingCrowd’s assets.
LendingCrowd carries out stringent identification checks on all lenders and borrowers using manual intervention and GB Group, a specialist in identity data intelligence. In addition, all borrowers will also have a credit search carried out through a credit reference agency. The credit underwriters who review the applications are also very experienced in looking for fraud indicators.
Visit our How it works page to discover how our purpose-built platform brings together lenders looking for new opportunities and borrowers seeking access to finance.
We take a number of factors into account to determine our credit decisions, and you can find more detail in this blog post. In short, we look at cashflow, management ability, a business plan and the industry the business is in.
The credit scores shown for each loan are supplied by a third-party credit reference agency. They’re independent of the Risk Bands assigned by our Credit Team, who consult the company and consumer reports from credit reference agencies to form part of their assessment.
Our Credit Team assign the Risk Bands for each loan, based on their assessment of the loan using their experience, our in-house credit assessment tool and affordability models. Each Risk Band corresponds to a minimum interest rate, listed below:
We take debentures or bond and floating charges over the company, or third-party guarantees where appropriate. We decide security arrangements on a case-by-case basis.
If a repayment is late, we’ll contact the borrower as soon as possible to establish the reason for this and when we can expect payment. If we don’t receive the payment within 4 days of the due date, we consider the repayment to be overdue and will charge the borrower a late payment fee. We’ll also inform credit reference agencies that the borrower has missed a payment. This could affect the business’ and the director’s credit ratings and therefore their ability to borrow more money.
If the borrower hasn’t paid within 45 days of the repayment date, we’ll consider the loan to be in arrears.
When a borrower can no longer meet their repayment schedule nor pay the outstanding loan, we’ll declare the loan as a default. We’ll identify the outstanding capital as a bad debt. This happens after 90 days – this is a standard adopted in December 2019. For accounts held outside an ISA, lenders can declare bad debts against earnings on their tax statement.
If a loan is declared a default and there’s no clear indication of how and when we’ll receive the payment, we’ll take recovery action. This will include referring the matter to our panel of experts – which includes solicitors, accountants and debt collectors – who’ll provide guidance or act on our behalf, whichever is the most appropriate course of action. Our loans have various types of creditor protection in place, so our recoveries process can involve forcing the sale of assets through a legal process, which can take time.
Read more about our default process.