Rebuildingsociety.com recognises the need to balance its recovery processes by taking a proactive approach to recover lender debts and working with a borrower to ensure that a mutually beneficial arrangement is reached for the full repayment of the debt.
While we aim to maintain contact with our borrowers on an ongoing basis, so as to build and maintain a relationship between lender and borrower even through times of difficulty for the borrower, we outsource all our late repayment recoveries to ensure efficient and robust management of the debts owed to lenders.
Every borrower account is monitored on a daily basis. We will continue to update you as often as possible as to the progress of the late repayment and legal recovery processes.
Our process for following up on late repayments is as follows:
Where a repayment is one day overdue, our agents will attempt to make contact with the borrower, to make them aware that the repayment is late and to determine the reason for the delay and when the repayment will be made. Most late repayments are resolved this way.
Should no response be received to the Stage 1 enforcement, our agents will engage in telephone contact for 5 days to come to a repayment solution.
When a repayment falls 3 days behind, it will then show as overdue on the repayment schedule that is visible to lenders.
If no payment or payment promise is secured by day 5 then a secondary, demand reminder email will be sent to the director and guarantors. At this stage the borrower will be charged an administration fee of 15% of the amount owed.
If no response is received from the secondary email, then further telephone contact will continue for a further 5 days.
After 10 days of telephone contact, should there still be no payment or promise of payment, a third and final email will be sent reminding the debtor of their own personal liabilities that are secured through whatever personal guarantees and/or securities that are held. Discussions will also be held with rebuildingsociety and our agents to determine the best course of action.
rebuildingsociety believes it is in the best interest of all parties involved to endeavour to reach a workable repayment solution with the borrower rather than look to prematurely commence formal legal proceedings. Should formal proceedings be initiated or a loan defaulted prematurely, it is more likely that where there had been continuous communication from the directors, any goodwill will be lost and the chances of recovery greatly diminished. As such, in most cases, rebuildingsociety will look to continue past stage 5 before deciding to set a loan to default.
Should the borrower continue communication with rebuildingsociety or its agent, then the recoveries process will continue to Stage 6. Should a repayment be promised, our agents will continue to remain in contact with the borrower to ensure that this will be met. If at 30 days a repayment has not been received, we will write a further formal warning letter to the Director/s of the company as well as relevant guarantors, informing them of the missed repayment and request that the overdue repayment and the next repayment be made. We will also remind them of the consequences of default.
At 30 days overdue we will also suspend micro loan trading.
If at this stage we have still had no repayment, if communication with the borrower has discontinued, or if a repayment promised during the process has been missed, we will again talk to our agents, review the accounts and determine whether legal action should be initiated.
Depending on the circumstances and loan security,we may then look to formally default the loan.
Should a loan be set to default, we will demand the full repayment of the amount outstanding on the borrower’s account, from both the company and the guarantors. This is the first step in allowing us to commence legal action.
All our loans are secured with at least a Personal Guarantee from the director or majority shareholders; as such, we will look to the following solutions as our first steps of legal recovery.
1. Payment Plans
Once a loan is placed in default, we will issue a statutory demand for the full repayment of the loan from the guarantors. Our aim at this stage is, through the instigation of a formal recovery process, to come to a fair and affordable repayment plan with the guarantor/s.
Why? Ideally we want to work with the guarantors to be able to meet their debts in such a way so as to allow them to continue with their business, where possible, by repaying the debt owed over a period of time. This solution is the most suitable for all parties, as it is most likely to see the debt repaid, albeit during a longer period of time.
We will not agree a repayment plan of less than 100p in the £ at this stage.
2. Individual Voluntary Arrangements
We will not accept an informal settlement form the guarantors that proposes to reduce the debt owed, and will only allow the debt to be reduced if the guarantor enters into a formal Individual Voluntary Arrangement (IVA).
Why? When a guarantor enters into an IVA, this is a binding legal arrangement, and requires the involvement of an insolvency practitioner (IP), who is an officer of the court. The IP is responsible for ensuring that the proposal delivered by the guarantor is fair and accurate. Without a formal IVA there is no third party that is obliged to ensure that the terms are adhered to.
An IVA is designed to give the guarantors another chance once we begin legal action.
Bankruptcy is the last step in recovering the debt from the guarantors. Bankruptcy is preceded by us sending a statutory demand to the guarantors in an effort to come to an arrangement, as in examples 1 and 2.
Bankruptcy is often a last option for a guarantor and is the least attractive for them and also often for the lenders.
Why? Should they be made bankrupt, they will not be allowed to act as a company director, and they will not be able to get any lines of credit. Furthermore, a creditor’s level of recovery in bankruptcy is often greatly diminished.
However, sometimes bankruptcy can be the best option for a guarantor. Where a guarantor enters bankruptcy, we will always try to appoint an insolvency practitioner from our panel, appointed as Trustee in Bankruptcy. The Trustee is responsible for taking charge of the guarantor’s assets and carrying out various investigations into the guarantor’s conduct etc.
If a guarantor enters bankruptcy, the chance of a material recovery for lenders is unlikely. As such, rebuildingsociety will always try work to arrange a more beneficial solution for the lenders.
4. Court Action
In some unusual cases, we may need to take court action by appointing High Court Enforcement Officers (i.e. bailiffs) who will try and agree a payment plan with a guarantor, or, where appropriate, we will try to obtain a charge on their property and then later an Order for Sale.
Court Action is an expensive and lengthy process and one that we will look to avoid where possible, but acknowledge that from time to time, such action will be required to ensure the best outcome for lenders.