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Thousands of Ratesetter investors in year-long queue for cash

Emma Lunn
Written By:
Emma Lunn

Thousands of Ratesetter customers who tried to withdraw their money from the peer-to-peer lender as far back as March are still waiting for their money.

The peer-to-peer lender saw a significant increase in release requests in March when the coronavirus hit the UK.

Although Ratesetter claims requests subsequently fell back to normal levels, investors who tried to withdraw their cash eight months ago are still in virtual queues of thousands of people.

Some investors have been told there are more than 10,000 people ahead of them in the wait for their money. At the current rate of redemptions, this means some investors may end up waiting a year or more to withdraw their investment.

The news comes almost a year after the Financial Conduct Authority clamped down on the peer-to-peer sector in a bid to protect investors.

The regulator introduced new regulations in December 2019. Since then ordinary investors have only been able to deposit up to 10% of their assets in peer-to-peer loans, unless they’ve received regulated financial advice or have already made two investments in the past two years.

A Ratesetter spokesperson said: “Unlike other investments which stopped access, we have delivered requests every day and have kept our investors updated regularly. We are making progress – since the start of the pandemic, we have delivered more than £130m. Momentum has increased in the last few weeks, with £13m delivered in the last two weeks alone. We continue to deliver as many release requests as possible every day across the different products. Invested money continues to earn interest while awaiting a release.”

However, Ratesetter investors are earning less interest than usual. Since 4 May, they have only been receiving 50% of interest, with the other 50% going to Ratesetter’s Provision Fund, which Ratesetter says is for the protection of all investors. This will be the case until further notice and reviewed every quarter.

How long investors have to wait for their money from Ratesetter depends on which product they are invested in.

According to Ratesetter’s most recent weekly update, sent to investors on 13 November, the platform is currently working on requests made on 16 March in Access, Plus and Max; and 31 October in the 5 Year market. Processing in the one-year market is up to date.

A Ratesetter spokesperson added: “We are delivering requests in chronological order within our different markets: Access, Plus and Max; 1 Year; and 5 Year. The speed of the delivering requests in each market depends on market-specific factors including the overall level of release requests received and how they are distributed over time; the supply of funds, which varies on a daily basis; and the amount of cancellations of release requests made in each market.”

Investors are also struggling to withdraw money from Funding Circle, another peer-to-peer lender. Funding Circle lends to a diversified portfolio of small businesses, who pay back part of their loans, plus interest, each month.

Pre-Covid, investors had two ways they could access their funds. The first was to turn off lending which allowed investors to receive part of their outstanding portfolio back each month in repayments. These repayments typically work out at about 3 to 5% of an investor’s outstanding portfolio each month.

The second option was to sell loans to other investors on a secondary market, subject to demand from those investors.

Since April, Funding Circle says it has been focusing on helping small businesses access finance through the Government’s Coronavirus Business Interruption Loan Scheme (CBILS).

As retail investors are not able to participate in these loans, this means lending is currently paused for all new and existing retail investors. The option to access funds early by selling loan parts to other investors has also been paused.

A statement from Funding Circle said: “We expect to open the retail lending marketplace once conditions allow.”

However, it’s a much more positive story at rival peer-to-peer platform Zopa. It says it is currently selling investor’s loans within its usual timescales, with the majority of customers seeing sales processed within a week.

A Zopa spokesperson said: “Zopa had been tightening its credit criteria for some time, including two rounds of tightening prior to the coronavirus outbreak. We acted swiftly in response to the crisis back in March to make further, significant changes to our credit policy, including taking the temporary step to only lend to new customers in our lower risk markets, in order to both protect investors and take a responsible approach towards borrowers at this time. This action has enabled us to continue to accept loan applications throughout the pandemic.

“Based on the decisive action we took at the beginning of the pandemic and the data and experience accrued over our 15-year track record of lending, our modelling suggests that the vast majority of investors will continue to see a positive return on their investment over 2020 and 2021.”