eMoneyUnion.com - The People to People lending platform launches today
Manchester, England (PRWEB UK) 9 July 2013 -- Lee Birkett; Founder and CEO Comments:
"Ever since the credit crunch bit hard in 2008, savers have been searching for a decent return on their money and millions of borrowers with a less than perfect credit score who really needed a loan have been left with expensive payday loans or doorstep lenders as their only options. Something needed to change.
Having built one of the first fully regulated online finance platforms in the 90's, I got really excited a couple of years ago when people started taking money out of their savings accounts and putting small amounts onto non-regulated social lending platforms such as Zopa and Ratesetter. I have been a great fan of these platforms and the concept ever since.
Zopa and Ratesetter only approve 10 - 15% of their online loan applications due to their stringent credit rating requirements. eMoneyUnion are not competing with Zopa and Ratesetter, we want to help arrange loans for the 85 - 90% that don’t qualify with these platforms and expand the social lending economy to include family and friends where possible.
In the last year the Peer to Peer sector has grown 300% and in the UK sprinted past the £500 million lent barrier.
A recent study by innovation charity Nest suggests that the sector has the potential to account for £12.3bn of loans a year, so we are looking forward to being an active participant in this financial revolution.
Ever since this financial phenomenon got underway, the only thing holding me back from launching our own platform was the lack of regulatory visibility. This changed in March 2013 when the FSA produced a regulation paper confirming that Peer to Peer platforms are to form part of the OFT's regulatory transition to the FCA in 2014.
Peer to Peer platforms are being proposed to be categorised as a bespoke regulated credit activity under the new regulations, therefore giving enhanced protections to lenders and borrowers.
It's great to be at the start of something really big, and it feels great to be able to deliver savers the returns they desire and loans to people who need them most. It's a real win-win."
Notes to editors:
Peer to Peer Lending is not currently regulated by the Financial Conduct Authority and lenders monies are not covered by the Financial Services Compensation Scheme. The Peer to Peer lending platforms operating under license in the UK today are regulated by the Office of Fair Trading for debt administration.
The eMoneyUnion platform acts as a matchmaking and underwriting service, presenting pre-approved individual borrowers to individual lenders, who can then decide to lend or not. Loans can be requested for amounts between £1,000 and £10,000 for any purpose including cars, consolidation and we will also encourage applications from those with low credit scores, the borrowers will however need to find a suitable Personal Guarantor with a very good credit history.
Individual lenders monies are ring fenced in a Lloyds TSB Bank PLC client account. Additional security is provided by the eProvision fund which has been created as a back stop to maintain regular interest repayments to personal lenders in the event of non-payment by the borrower and Personal Guarantor.
The total high cost credit market is currently estimated to be worth £8BN a year and a large percentage of the UK's most financially vulnerable are trapped with these unaffordable and often short term lenders. If these borrowers had access to longer term loans and at a fairer rate, their financial and mental well-being would be dramatically improved.
eMoneyUnion are not involved in the high cost credit or payday loan market i.e. 100’s% + APR. One of our key objectives is to get people out of an expensive debt spiral and onto a fairer interest rate. This consolidation process, in the majority of instances, improves the credit rating for people and opens up even cheaper access to credit further down the line.
In recognition of the particular financial difficulties payday loan borrowers are facing, and in a positive move by the Government, the law has been changed to allow sufficiently resourced local credit unions to increase the interest rates charged, to reflect the risk of lending to financially challenged borrowers from 2% to 3% per month.
One of the main downfalls with credit unions is that coverage is patchy, for example the large town of Macclesfield where eMoneyUnion is based, has no credit union at all. The terms of credit union membership also vary dramatically, with many of these charities requiring people to be established savers before they can borrow any money. Being able to access credit from a charitable credit union to settle payday loans is very much a postcode lottery.
eMoneyUnion have no postcode restrictions to borrowers or lenders, we also do not require borrowers to be saving for a period of time before being able to apply for a loan.
The Borrowers
A consequence of the credit crunch has been the devastating explosion of payday loans. Millions of people who had nowhere else to turn after having their overdraft pulled or their credit card limits reduced have fallen into a financial payday trap.
To encourage individual lenders to provide a loan to someone with a less than perfect credit history, we needed to come up with additional incentives i.e. a higher rate of return for the lenders was a big driver, but the critical element was providing as much security of loan repayment as possible. After consultation with prospective individual lenders, we came up with the Bank of mum and Dad concept, insisting that borrowers obtain a Personal Guarantor to support them in their loan application.
We do not rely on credit checks alone and we will consider proposing all applicants for a loan, providing they can prove to us that they can afford to repay the loan back.
The Lenders
There are an estimated 50,000 active social lenders in the UK, all wanting a better return on their money and happy to be part of a sharing economy. The majority of lenders will spread their risk over various Peer to Peer platforms. The largest platforms by monies lent are No 1 Zopa, No 2 Funding Circle and No 3 Ratesetter.
The 3 largest platforms are members of a recently formed trade association, The Peer 2 Peer Finance Association. We are fully supportive of The Associations Rules and Operating Principles. Once eMoneyUnion has a notable scale of completed loans live on the platform, we will be applying to join. We have shared our business plans with the Independent Chairman of The Association Christine Farnish who has confirmed that “The whole Peer to Peer activity will be regulated end to end by next spring.”
eMoneyUnion lenders can choose the amounts, time periods and Borrowers Risk Ratings “AAA, AA or A” that they wish to lend to. The rating is a combination of the borrower and their Personal Guarantor.
For further information about this press release please call eMoneyUnion:
Lee Birkett on 01625 750027 or email lee(at)eMoneyUnion(dot)com
Lee Birkett, 01625750027, [email protected]
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