RateSetter rejigs relationships with former wholesale lending partners

By Ryan Weeks on Wednesday 3 May 2017

Alternative Lending

Peer-to-peer lender takes stake in one lender, acquires two more.

RateSetter, one of the UK’s biggest peer-to-peer/marketplace lenders, has extended what it calls its “direct lending distribution network”. What this means is that RateSetter has acquired two specialist motor finance firms, in addition to changing the way it works with guarantor lender George Banco.

The acquired motor finance companies are Vehicle Stocking Limited and Vehicle Credit Limited. Both firms were acquired out of their parent company’s administration, and both have previously received wholesale funding from RateSetter. RateSetter will now lend directly to these companies' customers.

The size of these two motor finance firms’ combined loanbooks is roughly £30m. These portfolios are said to be “performing well”, and we're told they would have continued to be serviced had RateSetter not stepped in.

Another of RateSetter’s former wholesale lending partners is George Banco, a guarantor lender with a representative APR of 49.7 per cent. RateSetter has now taken an equity stake in the company, and will lend directly to its 10,000 customers.

Previously, RateSetter would lend to companies like George Banco, with George Banco then using that money to lend on to borrowers. The difference now is that the customers of these three firms will hold loan contracts directly with RateSetter’s investors.

The FCA’s now infamous “Dear CEO” letter in February warned the UK’s peer-to-peer platforms that lending to other lending businesses would not be tolerated. It said that the borrowers of wholesale P2P funds may be deemed to be accepting deposits.

RateSetter has been winding down its wholesale lending since December of last year. The platform had originated £273m of loans to lending businesses as of the beginning of March, according to AltFi Data. In theory that number shouldn’t have changed.

“Our focus on direct lending supports our goal of delivering excellent risk-adjusted returns for investors and attractive finance to borrowers. To achieve this, we have invested in our direct origination capabilities by bolstering our in-house expert lending teams,” said Peter Behrens (pictured), RateSetter’s chief operating officer.

“Today’s announcement builds on this – by extending our direct distribution network we build closer relationships with our borrowers and create more opportunities for future growth.”

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