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If you’re new to peer-to-peer lending, you’ll be getting used to a whole new world of finance, one which turns traditional finance methods on its head. Peer-to-peer lending brings a new level of transparency and practicality to managing your funds. If you’re a peer-to-peer early adopter, you’ll no doubt be used to this new way of thinking and lending, but may be uncertain on a number of the intricacies of each platform or have doubts as to where responsibility lies on certain matters. Here, we take a look at platform vs lender responsibilities.

Application Underwriting

We will always do an initial level of investigation into all businesses that apply for a loan through rebuildingsociety.com to ensure that the business meets certain hygiene factors. Only businesses that meet these standards go on to be listed on the platform for lender review. We take this process very seriously and actually reject over 85% of the applications that we receive. During this process, we request Management Accounts, statutory accounts, bank statements, Statements of Assets and Liabilities of the directors, and individual credit reports of the directors. All this information is then used to develop a risk rating which will set the maximum interest rate at which you can start lending. When a loan is listed on the platform, we give you with much of the information that we have received, highlight some risks identified with the business, provide you with information of the performance of similar loans and also provide you with an avenue to ask questions of the directors directly, prior to committing any funds. What we don’t do… Whilst we do check that the businesses are genuine and have the ability to service a debt, we do not state that the loans are completely devoid of risk or appropriate to you as an individual. Every loan carries some degree of risk. When a loan is listed on the platform, you should review it yourself, carry out your own investigation into the business and weigh this against your risk appetite. Scrutinise the accounts provided, ask further questions and make a conscious decision to lend or not. If in doubt, you should seek independent professional financial advice.

Bad Debts

When a peer-to-peer loan is formed, a separate loan agreement is effectively created between each individual lender and the borrower. The loan agreement sets out the rules on what each party's responsibilities are, and what will occur should a borrower fall behind on their repayments or be in breach of their obligations according to the agreement. As the agreement is between each individual lender and the borrower, each lender has the right to pursue their debt from the borrower in the event of default. When a loan goes into default or is behind on a repayment, we will in the first instance notify you. If the loan is in default, we will make you aware of your ability to pursue the debt separately from other lenders, and will give you a period of time in which to notify us of your intention to pursue. Should we not hear from you, we will assume that you want rebuildingsociety.com to pursue the debt on your behalf. We will then begin the recovery process and keep you notified of the progress. We aim to update you on a regular basis and will do so via email, as well as through the ‘Loan Updates’ tab. From time to time, we may put a poll out to lenders, to decide between avenues of action in the recovery of funds. We pursue the debt through external professional debt collection agencies to maximise chances of recovery. What we don’t do… We do not guarantee any level of recovery when a loan goes into default. Given the varying nature of each of the businesses and the complexities of debt recovery, we cannot guarantee any return after default. When a loan goes into default, you should keep up-to-date with the recovery process and stay on the lookout for any opportunities to have your say through any lender polls. Every loan listed has the potential risk of defaulting; therefore it is important that you ensure you employ mitigating strategies in your lending habits, by diversifying your portfolio and carrying out a good level of initial due diligence. rebuildingsociety.com does not have a provision fund to cover losses and peer-to-peer lending is not covered by the Financial Services Compensation Scheme (FSCS).

Divesting

Depending on your strategy or personal situation, you may need to divest from a loan that you have entered into. We provide an avenue for you to divest through the Secondary Market. The Secondary Market allows lenders to put up their micro loans for sale at either a discount or a premium. Generally, lenders who put up micro loans for sale at a discount fall into one of three categories: those divesting because they need to access their funds quickly, those that sell as part of their strategy, and those who may have lost confidence in a loan and want to reduce their exposure. What we don’t do… Guarantee that you will be able to divest or divest within a certain time period. The Secondary Marketplace is driven by supply and demand. Therefore, unless there is demand for the loan part(s) you are selling, it may take longer for you to liquidate your funds. It is important that before lending any funds, you consider whether you are likely to need those funds in the short term. If the answer is yes, you should consider not lending, or lending a lower amount. Tax Interest received on your peer-to-peer lending is taxable. If you are basic-rate taxpayer, you can earn interest of £1,000 tax free from both savings accounts and peer-to-peer lending combined. If you are a high-rate tax payer, you also benefit from a tax break, but this is limited to £500 of interest. You’re not taxed on losses, meaning that you do not pay taxes on money you don’t receive, as such any debts declared as bad debt are tax deductible. We try and make the chore of completing your tax returns easier by providing you with a personalised tax statement, which you can access via your dashboard. What we don’t do… We do not submit your returns on your behalf. It is your responsibility to complete your tax return and submit it to HMRC. For further guidance on the treatment of peer-to-peer finances, visit the HMRC website.

Client Money

When you add funds to your rebuildingsociety.com account, these are held in a segregated client account held with Barclays Bank PLC. As a regulated and authorised financial services company, rebuildingsociety.com is required to adhere to stringent rules on the management and handling of client money. What we don’t do… Unlike other types of financial institutions, we do not make use of or invest your funds. Therefore, the funds you put into the client account are liquid and available for you to withdraw or lend, of your own accord, at any time. As a lender on rebuildingsociety.com, you have the freedom to choose when, how and to whom you lend. As a P2P platform, we are committed to providing you with suitable lending opportunities and top quality service. To enjoy better returns on the funds you lend, you as a lender must actively and responsibly manage your funds. If you ever have any questions about your account of the platform, we're always available to talk. We also enjoy hearing from you and about your experiences. Contact us!