Lending: How The Money Platform Operates

Risk Categorisation and Borrower Pricing

The Money Platform is defined as a High-Cost Short Term Credit lender (“HCSTC”). By nature of the product and the typical industry default rates, all loans can be defined as “High Risk” and priced accordingly irrespective of the specific segment of loan term, amount or customer profile (as sub-segments of the “high risk” overall classification).

Pricing and financial treatment of customers was updated post the FCA’s investigation in 2015 – ‘Price cap on high-cost short-term credit’ report. As a result, the maximum fees chargeable under a high-cost short-term credit agreement are:

It should also be noted that The Money Platform performs maximum forbearance for any customer in difficulty, where interest in frozen at 0% and payment plans arranged within fair, reasonable and affordable timescales as soon as the customer enters into dialogue with the Collections department.

Lender Pricing and Lending Return

The Money Platform has chosen to adopt the typical 0.7-0.8% pricing as our financial model has determine this is the required level of charges to ensure a profitable sustainable platform, whilst reasonable and fair lender return once defaults and operational costs have been considered.

The expected default rate for The Money Platform is estimated to be 4.6% of all loans made via the platform, based on modelled default rates on historic loan data tested on The Money Platform’s current lending criteria. See the "Outcomes Statement" for more information. The target default percentage is not the percentage of borrowers that miss payments but the final loss rate after all collection avenues have closed and repayment plans completed.

The lender estimated annual rate of return is 5.5%, considering fees, default rates and taxation on the interest received. The amount of income tax payable is dependent on individual lender circumstances and may be subject to change in the future.

You can read more about Lending with The Money Platform on our Lender Risk Statement

Role of the platform

We operate the The Money Platform a service that matches lenders with borrowers, and to facilitate credit agreements between them. Additionally we administer and manage every aspect of these loans on behalf of lenders.

When registering as a lender with The Money Platform and agreeing to these Service Terms Lenders appoint The Money Platform as agent with regard to the origination, negotiation, administration, collection and management of loans. For the avoidance of doubt this The Money Platform's role includes but is not limited to:

Wind-Down Plan

The Money Platform’s strategy is to continue to grow in the P2P lending sector. As with any business, there are circumstances, such as a material change in market conditions, which could impact that strategy such that we decide, or are obliged, to stop operating our P2P platform. In this event we are required by FCA regulations to have in place a plan to manage the run off of our loan book in an orderly fashion, and this plan is called the Wind Down Plan

Details of the wind-down plan are documented internally at The Money Platform, shared with the FCA on request and include a 12-month window for the collection of all open loans. The risk to the Lender is mitigated because all loans are for a maximum of 3 months, therefore a 12-month window has been chosen to give sufficient time for loans to complete naturally or include an extended time period for collections activity or re-arranged payment schedules to complete. Internal data indicates that we usually collect >100% of the amount lent within 12 months across our whole loan book. Due to the reduced risks during wind down and the limited financial resources required, it is fully expected that the process will be orderly. It is not expected that insolvency practitioners will be required although we may outsource collection of loans to a 3rd party (we do this currently for some overdue loans, as permitted under the loan contract) in order to reduce the time and cost of collecting the final payments.

During the period of a Wind Down