Overdue Loans: Arrears and Default policy
Our Overdue Loans: Arrears and Default Policy sets out the principles that govern decisions made by EstateGuru Marketplace (“EG” or “we”) on how we will deal with borrowers whose loan(s) are in arrears or default.
A loan is in default when a borrower is unable to meet the legal obligations (or conditions) of a loan. Prior to this, the loan is either on the schedule (all payments are made as they fall due) or in arrears (where some payments are not paid on the original loan repayment date).
All borrowers seeking loans via the EG plaform will be legal persons, and as such the FCA’s rules in relation to arrears and default (as detailed in Chapter 7 of the FCA’s consumer credit sourcebook (“CONC”) in the FCA Handbook of Rules and Guidance) will not apply.
EG will still have due regard to its obligations under the FCA’s Principles for Businesses to treat its customers fairly at all times, however in doing so it will have regard to the commercial nature of its borrowers and the rights and interests of lenders (which may include lenders who are natural persons lending outside of the course of their trade, business or profession).
EG’s overdue loans default policy:
- A loan is in default when the redemption figure is not paid in full within a period of 180 days beginning on the loan repayment date provided for in the relevant loan agreement (the “Tolerance Period”). EG considers this Tolerance Period to be reasonable and provides a fair opportunity for a borrower to repay.
- A loan is in default where a borrower is unable to provide EG with reasonable evidence or sufficient clarity as to how the loan will be repaid within the Tolerance Period.
- A loan will be deemed to be outstanding on the first working day after the Tolerance Period.
- At EG’s absolute discretion we will deem a loan to be in default at any time throughout the Tolerance Period.
- Loans will continue to accrue interest during the Tolerance Period but it will not be paid to the investor until the sale of the security is completed. The final amount due to the investor depends on the amount of repayment that EG is able to secure.
- At EG’s discretion, a loan repayment date may be extended before or at the original repayment date.
- When the original loan repayment date is extended, the Tolerance Period is reset to start the day following the new repayment date.
- The original loan repayment date may only be extended while in the Tolerance Period if the borrower is able to pay sufficient funds to cover:
- all interest due; and
- sufficient interest at the standard rate to extend the loan term so that the date of the extension will be prior to the new repayment date.
- Where a loan is in default and the Tolerance Period is over, we will appoint a recovery agent to enforce any relevant security as soon as is reasonably possible, paying regard at all times to our obligation to treat customers fairly.
- We then consider all practical sales options for a commercially viable outcome, which may include an auction or selling recovered assets on the open market.
- We may take any action, including legal action, we deem appropriate to ensure the repayment in part, or in full, of a defaulted loan.
- Our Credit Committee may remove a loan from a default classification under exceptional circumstances where a borrower is able to provide reasonable evidence that they will repay the loan within the Tolerance Period.
- During the Tolerance Period the loan will be marked “AR” (arrears) on the platform within five working days.
- Where it becomes apparent to us that a loan will not be repaid by the original repayment date or any other repayment date, the platform shall be informed of this typically within five working days of this.
- If our conclusion is that a loan will be repaid after entering the Tolerance Period, we will update the platform within five working days with an explanation of why the loan has not been deemed as in default (i.e. there is sufficient evidence that the loan will be repaid within the Tolerance Period).
- Loans within the Tolerance Period will remain available for sale and purchase on the Available Loans section of the platform.
- We will indicate the interest status of a loan once it is within the Tolerance Period on the platform. All changes in status will be noted on the platform within five working day of the change.
- Within five working days of a loan being deemed as in default by EG, it will be placed within the Default Loans section of the platform.
- Loan parts from a defaulted loan will no longer be listed on the Available Loans section of the platform and will not be available for sale and purchase on the Default Loans section of the platform.
- An update will be posted on our platform within five working days of any exception to this policy being agreed.
- Exceptions may be made to this policy where deemed appropriate by our Credit Committee, taking into account the fair treatment of customers at all times.