What measures does Lending Loop take in order to obtain unpaid payments?
It is not uncommon for a borrower to be several days late making a payment. Quite often, this is due to the borrower's customers taking longer than expected to pay for goods or services the borrower provided.
We receive loan payments by direct debit from borrowers' bank accounts. When we are informed that a direct debit has not been received due to insufficient funds in a borrower's bank account, we get in touch with the borrower as quickly as reasonably possible. When we get in touch with the borrower, we try to find out why the borrower's account had insufficient funds, and try to establish a timeline for the borrower to make the payment.
Until the payment is received, we will attempt to maintain frequent contact with the borrower to remain apprised of its situation and the time we should expect to receive its payment.
Unless we are arranging a payment plan, if the loan is still late 7 days after the payment date, we will charge an administration fee of 15% of the arrears. The purpose of this fee is to encourage borrowers to get the loan back to fully performing, and not to prioritize other creditors over their debt to Lending Loop lenders. This fee, if received, goes towards our irrecoverable costs for recovery actions. We believe that it is in both our interests to resolve each late payment or defaulted loan as quickly as possible and have money repaid to you.
In most cases, it is most appropriate to continue to monitor a borrower's situation and recover any outstanding payments. In some cases, we may decide that the most prudent course of action is to declare the borrower in default of its obligations under its loan agreement and work to recover the entire amount outstanding.
When the loan has defaulted, we demand full payment of the full outstanding liability from the borrower and the guarantors. This has the effect of crystallizing the debt of the guarantors and enables us to commence legal action (or formal insolvency action) against them.
a) Payment Plans
We will always seek to agree a fair and affordable payment plan with borrowers and guarantors. We want guarantors to get back on their feet and repay the loan in full over time, and usually, we will not agree to an early settlement figure for less than the full amount owing. Payments are often small at the start of a payment plan and take several months until they increase.
Sometimes the individuals acting as guarantors will enter formal bankruptcy. When an individual enters bankruptcy it is very rare that there will be a material recovery for investors.
c) Court Action
Court action may be required when a borrower becomes entirely unresponsive. This may result in us appointing a bailiff to agree on a payment plan with a guarantor or perform collection and liquidation of property. This action is usually the last resort.