What happens if we stop operating?
We must consider what happens if there are circumstances that cause us to cease operations.
As a regulated peer-to-peer lending platform, we maintain a Wind Down Plan (WDP). This is a plan that sets out how your funds and investments would be managed in the event of platform failure, to ensure the least disruption to you.
What Might Cause Us to Need to Initiate the Plan?
Factors
- The simultaneous loss of key revenue drivers, to the point where it is inefficient for the platform to continue trading
- External legal challenges, or the crystallisation of an unforeseen large new cost
- A critical infrastructure or hosting failure
- A sudden regulatory change or action that threatens the platform business model
Mitigating Risks
- Unlike many other platforms, we’re profitable! We have diversified revenues. So we are not solely reliant on the completion of new loans for our income.
- Our technology is licensed through our sister company, White Label Crowdfunding Limited. Meaning that we are not reliant on an unconnected third party to maintain the platform.
- Our compliance department has extensive knowledge and expertise in P2P lending, and maintains a risk management framework to monitor risks and balance risk against commercial objectives
- The security for all loans is held by a separate legal entity. This security trustee structure means that the security for loans is held by the security trustee for the benefit of platform lenders regardless of the status of the platform
What is the Plan?
Through our role as a network principal, compliance consultancy, and through our relationship with our sister company White Label Crowdfunding Ltd, our team already has experience in efficiently winding down four P2P platforms.
Depending on the circumstances, we may either:
- Cease taking new registrations and lender credits and initiate a reduced service which would see the platform operate much as normal, but with a focus on ensuring all outstanding loans are repaid according to the loan schedule and loan terms.
- Sell the loan book to another lending company. In this scenario, the sale of the loan proceeds would be used to repay lenders their capital in existing loans, and return any unpledged available funds to lenders directly.
What does this Mean for Lenders
In the event of needing to initiate the wind-down plan, lenders would still be able to access the platform as normal, but unable to make any new loans or credit new funds.
Lenders would still be able to:
- Withdraw available funds
- Access their dashboards and information on previous and outstanding loans
- Access their tax statement information
- Contact us via email or phone
Operating Clauses in Lender Contracts
We do not envisage that the loan agreements or lender terms to which you are party to would be affected by the need to initiate our WDP.
We may assign our interest in the loans to a servicing agent if required, and borrowers will still be obliged to repay their loans to you under the original terms of their contracts.
All unpledged lender funds are kept in a segregated client account with Barclays Bank PLC; separate to company funds as per regulatory requirements on the management of client money.
Risks to the Plan
In developing this plan we’ve engaged extensively with our senior management team, board and external advisors regarding the effectiveness and suitability of the plan. However, there is always the risk that assumptions made in the development of the plan do not suit the particular circumstances presented at the time of needing to act on the plan.
Potential risks to the plan may include:
- If the wind-down trigger is linked to a negative change in the wider economic climate, this may have a negative impact on lenders beyond what can be reasonable prepared for. For example, a wider economic downturn may impact borrower repayment ability, and increase the default risk beyond that which can be reasonably anticipated
- Insufficient funding to facilitate the costs associated with debt collection over the lifetime of the loans outstanding, leading to defaulted loans not being recovered
- Services in a wind-down might need to be provided by a company that does not have the same regulatory permissions as ourselves, and so the protections currently enjoyed by lenders may be varied
