RateSetter is a peer to peer lending platform that matches investors with consumers, businesses, and property developers borrowing funds. The RateSetter ‘provision fund’ is pivotal to the RateSetter offering and has covered all borrower defaults to-date. RateSetter claims that no capital has been lost since platform formation.
Risk and Security
RateSetter manages investors’ credit risk through initial credit risk assessment and arrears management. Protection is further provided by the provision fund which is expected to cover any losses, ensuring no investor loses capital.
The provision fund reimburses investors in the event of defaulted loans. Any recoveries are credited to the provision fund. If the fund runs out and can’t cover losses, RateSetter will activate a ‘Resolution Event’ where all outstanding loan contracts are pooled together into a central pot and investors are paid back on a pro-rata basis. Ultimately, this means investors are exposed to every outstanding loan on the loan book and not to their specific P2P loan contracts.
Providing there are new investors on the RateSetter ‘Markets’, current investors with RateSetter can withdraw their funds before the end of their term. The Rolling Market product has no fee attached to accessing funds early. When investing in the 1 Year or 5 Year Markets, there will be a charge for accessing money early. The actual fee depends on individual investing circumstances.
If RateSetter were to enter into administration, the loan contracts between investors and borrowers would still exist. RateSetter has a fully funded plan in place to continue the facilitation of payments from borrowers to investors. This is funded by a combination of the income generated from the loans, plus any shareholder capital required.