Late repayments, arrears & loan default
The general use of the word "arrears" on a loan means: when a repayment instalment has not been paid in full and is past its due date to be credited in the Client Money Account. Arrears is quoted by the number of months’ payments that have been missed or not paid in full. Therefore a borrower who has missed two monthly instalments is two months in arrears.
However, on this site, we use four terms to classify the "status" of the loan, (including the word "Arrears" but we will write that with an upper case "A" - "Arrears" to avoid confusion!):
Status "OK" means that the loan is up to date with the repayment instalments.
Status "Late" means that one repayment instalment has not been paid in full and is past its due date to be credited in the Client Money Account.
Status "Arrears" means that two repayment instalments have not been paid in full and are past their due dates to be credited in the Client Money Account.
Status "Default" means that three or more monthly repayment instalments have not been paid. In this case the full repayment of the loan, and not just the repayment arrears, is required.
If you think that you may not be able to honour your instalment obligations to your lenders, you should contact us immediately. We will get back to you as soon as we can by email or telephone to discuss the problem with you.
If you are more than 3 days late in making any direct debit repayment instalment in full, or if your direct debit fails, we will charge the Late Payment Fee. You will also be charged additional interest on the late repayment amount at the loan rate.
If a Debt Collection Agency has been appointed, they will charge you an administration fee for the work they do in attempting to collect your repayments. The fee will be based on a percentage of the amount that is overdue to your Lenders, including any interest that accrues on overdue amounts. The actual percentages and fees are those applying at the time for the particular Debt Collection Agency used as set out in the Fees section of the Site.
If a borrower is late making a scheduled repayment instalment, as a lender, you do not need to do anything. Any missed repayments will first be chased by us and later chased on your behalf by our Debt Collection Agency. This is at no cost to you as the agency charge the borrower for their activity.
If the Lender Investment Product includes coverage by the Reserve Scheme you may, subject to conditions, receive a payment from the scheme. For more information on the Reserve Scheme please click here.
LATE, ARREARS & DEFAULT PROCEDURE
This is the general procedure that we follow if a borrower misses their repayments (it may vary for each case):
Day 0 - Notification of Failed Payment
Our bank notifies us that a direct debit repayment instalment has failed, or more than three days has passed from the due date of the repayment instalment and no payment has yet arrived. This could be due to a technical issue with the direct debit, or lack of funds in the borrower's account. If there are technical issues affecting the direct debit or our ability to receive the payment we will work to resolve the problem and enable the payment to be made.
Otherwise we will endeavour to contact the Borrower by telephone to arrange an alternative payment method.
If we cannot contact the borrower by telephone, we will send the Borrower an email stating the problem and requesting that contact is made with us as soon as possible.
Day 2 - Notice of Late Payment
By day 2 we require:
1. An alternative payment, or
2. a reasonable explanation of why the payment failed or was missed, and a promise of an alternative payment, or
3. at least some contact from the borrower,
otherwise we will send the borrower a formal “Late Payment” letter.
This informs the Borrower that if no alternative payment or reasonable explanation is provided within seven days of the date of the letter that their Loan case will be passed to our Debt Collection Agency for recovery.
Day 10 - Handover to our Debt Collection Agency
If no satisfactory outcome has been achieved, the Borrower’s Loan case is passed to our Debt Collection Agency, who will continue the collections process on our behalf. Where a Borrower has agreed an intention to pay by a certain date, we will not pass that debtor to our Debt Collection Agency until the agreed time has passed and payment has still not been received.
The Debt Collection Agency may use phone calls, text messages, letters and/or meetings and court proceedings when chasing the Borrower for payment.
We will continue to update our Debt Collections Agency, on a regular basis with an updated outstanding balance, to ensure that interest accrued and any LLI fees on failed repayments are taken into consideration, as well as any further failed repayments.
Notice of Arrears (2 months’ arrears)
If the borrower has missed two or more monthly repayment instalments we will send the borrower a “Notice of Arrears”, which includes an official information sheet on Arrears provided by the Financial Conduct Authority (“FCA”).
Our debt collections agency, will continue to act on our behalf during this time to collect the arrears.
Notice of Default (3 months’ arrears)
A default is when three monthly repayment instalments have been missed and arrears have accumulated.
As provided in the Terms and Conditions, on default the whole of the outstanding debt (failed repayments plus interest accrued on failed repayments plus outstanding principal plus LLI fees) will become payable by the borrower and accordingly, we instruct our Debt Collections Agency to collect all such debt.
We will send the Borrower a “Notice of Default”, which includes an official information sheet on Defaults provided by the FCA. Once the Notice has been issued the Borrower has fourteen days to respond to it; during this time neither we nor our Debt Collection Agency can make any contact with the Borrower.
If the Borrower is making an active attempt to make regular repayments through a repayment plan, we may choose not to request collection of all of the bad debt, depending on how much is being paid back. These regular repayments will be monitored on an ongoing basis, and a decision to request repayment of the whole debt will be considered regularly.
Once 28 days have elapsed since the issue of the Notice of Default and if no satisfactory response has been received, we may then offer the debt to be sold to the Debt Collection Agency. If the Debt Collection Agency purchases the debt, lenders will be paid their proportion of the purchase.
Finally, we send a notice to the borrower confirming the purchase of the bad debt has occurred and the ownership of the debt has now passed to our Debt Collection Agency. In this case we have no further responsibility to manage the borrowing, but we may provide relevant information on the borrower to the affected lenders at our discretion.
Any sums recovered by the Debt Collection Agency will be returned to the relevant Lender subject to deduction of a due proportion of the costs of recovery (the Debt Collection Agency charges) represented by that Lender's original loan to the entire amount loaned.
If the Borrower has been declared bankrupt and there are no available funds to release to creditors, or has successfully entered in to an IVA or Trust Deed, the debt is written off.