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Alternative Finance blog


RateSetters withdrawal from the P2PFA highlights the importance of data transparency

RateSetters withdrawal from the P2PFA highlights the importance of data transparency

1 month ago


Sacha Bright the CEO and founder of businessagent.com, the UK’s authorised equity crowdfunding and peer-to-peer (P2P) aggregator for businesses believes it is time for the UK’s debt and equity crowdfunding industries to improve standards saying; “RateSetters withdrawal from the industry trade body highlights the importance of data transparency. It is time for the peer-to-peer and equity crowdfunding industries to pull their socks up and improve their standards.”

  

His call comes following the news that RateSetter, one of the UK’s largest P2P business lenders, has withdrawn from the industries trade body the Peer-to-Peer Finance Association (P2PFA), citing a breach of the associations operating principles. RateSetter was a founding member of the P2PFA.

 

 Problems for RateSetter arose earlier this year when news emerged that it had lent money to The Vehicle Trading Group, which went into administration with £36 million of debt and had acquired Adpod, an advertising company that the Vehicle Trading Group had lent money to. RateSetter Said: “AdPod Limited got into financial difficulties and the business and its loan were then taken over by RateSetter.  We did this because we would not have written it under our current credit policy and we think it is fair that RateSetter as a company, rather than the Provision Fund, should stand behind the loan. £8.5m is currently outstanding. To be clear, RateSetter as a company is covering capital and interest payments due from AdPod to RateSetter lenders, because we think it is right to protect our lenders in this specific case.”

 

“We also acquired specialist motor finance providers Vehicle Stocking Limited (which provides stocking loans to car dealers) and Vehicle Credit Limited (which provides loans to car buyers) out of their parent company's administration. Under the previous wholesale arrangement, there is £37.8m outstanding which will now be repaid according to their original schedule. We will rebrand both businesses and invest in them to build on our existing direct motor finance capabilities. We believe the acquisition of these partners reduces the risk of this exposure.”

 

“It is clear that RateSetter was doing its best to fulfil its obligations to investors on the platform.” Said Sacha Bright. “The platform has stepped in and taken on the debt in order that investors do not lose out; but the cause for concern here isn’t just one of financial impact, it is also one of trust – without data transparency people cannot make informed decisions. We spend a great deal of our time banging on about the importance of data transparency; sadly, it is only when things go wrong or the Regulator steps in that people listen.”

 

“As long as users of RateSetters platform were aware of the risks that they and the platform undertook they were able to make an informed decision. RateSetters withdrawal announcement suggests that they did not adhere to their trade bodies transparency standards and as such their platform users may well have been unaware of the full extent of those risks. That will be a red flag for users and it should be a red flag for the industry.”

 

“The Financial Conduct Authority’s sector review is coming soon and we hope that they pick up on data transparency.  We have spent a lot of time talking to P2P and equity crowdfunding platforms about making it easier for people to be able to compare what they offer and being more transparent about how they operate. It is currently incredibly difficult to compare something as simple as costs across platforms – that simply isn’t good enough.”

 

“P2P financing and equity crowdfunding have important roles to play in providing small businesses and entrepreneurs in the UK with the funding that they need and investors with the returns that they seek.  But to keep growing they must work harder to overcome concerns about transparency.” 

 

“We believe that RateSetter cares deeply about the users of its platform. We hope that it addresses the operational issues that led to these problems and not only re-joins its trade body but also leads the way for the high standards of data transparency that the industry needs.”

 

RateSetter released a statement saying: “Membership (to the P2PFA) requires adherence to the P2PFA operating principles including transparency. No customer has experienced any loss from our actions but we recognise that our actions breached the principles of the association.”


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