#5 - Top 5 Key Features of P2P Regulation

By Simon Hawtin

#5 – P2P platforms must have a contingency plan in place in the event of the business model failing

This is the fifth and final part in a five-part series on the top 5 key features of P2P regulation which will begin April 1st 2014. The aim is to guide new and existing savers through the changes regulation will have on the industry, and more importantly what it means for you as a peer-to-peer saver.


A plan in case it all goes wrong. This is one of the key facets of the regulation; the platform must have a plan to run down the loan contracts in the event that the platform goes under. An orderly wind-down, if you will.

The FCA has prescribed two ways of doing this:

1. Have a back-up servicer, a 3rd party who will conduct the winding down process of all loan contracts; or

2. Make sure you have a Fully Funded Run-Off Plan, in other words a funded and detailed plan in the event you have to stop doing new loans and just run down the existing loans.

Why is it so important?

Black swans – aka events that come as a surprise and have a major effect, usually a negative one. The financial crisis is one example of a black swan. No one can perfectly predict the timing of them, but you can prepare for them.

Ensuring every P2P platform has a Fully Funded Run-Off Plan in place should instil confidence in consumers. So if the worst case scenario should happen, a detailed and fully funded plan is rolled out seamlessly to ensure contracts are fulfilled.

Our response

RateSetter has set-up an FCA approved Fully Funded Run-Off Plan. We feel strongly this responsibility should not be left in the hands of a third party with no knowledge of the loans.

RateSetter’s Fully Funded Run-Off Plan has calculated the cost of running down the loans and ensures there are more than sufficient funds to do so effectively. The implementation would be fully funded, mainly through the income that comes from the loans and will deliver a consistent level of service throughout the run-off.

The Provision Fund will continue on as before and step in to cover any defaults that may occur.

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