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What happens if a borrower misses a payment?

F.A.Qs for investors

 

if the borrower misses (or only partially pays) a monthly instalment, we (or an agent acting on our behalf) will contact the borrower to explain that we will reattempt to collect the outstanding payment on the next working day. If our attempts to collect the funds fail, 5 working days after the payment was due the borrower's account will be treated as “overdue”, but we will continue to attempt to collect the funds.

If the borrower becomes 3 or more months in arrears, or otherwise if we consider that there is a serious risk that the borrower will not be able to fully repay the loan the loan may be placed into “default”.  This means that the loan will be terminated and the outstanding balance of the loan (including interest to the end of the term) will become immediately due and payable. Borrowers whose loans are placed into default, or who are more than 90 days late, may be charged an additional collections charge of up to 15% of the outstanding loan amount remaining at the time of default to cover our internal costs of recovery. This collections charge will be in addition to what is owed to investors.

If we engage a Collections Agency to assist with recovering amounts from a defaulted borrower, the costs of the Collections Agency will be deducted from any recoveries (we will also not charge the collections charge of up to 15% of the outstanding loan amount).  The remaining proceeds will be distributed to investors.  Where possible, the costs of the Collection Agency and field agents will be added to the debt owed by the borrower, so as not to reduce the amount that investors receive.

When a loan is placed into default, Funding Circle will notify you that all of the outstanding loan parts will be assigned to Funding Circle Limited (“FCL”).  We wish to assign the debt to our subsidiary so that we become a significant creditor and can commence court proceedings against the borrower on your behalf.

FCL will assess the amount of debt that may be successfully recovered.  FCL will act in a fair and proportionate manner to achieve the maximum recovery for all affected investors.  In so doing, FCL may, amongst other things, agree extended payment terms, a sale of the debt to a third party, or it may commence winding up or bankruptcy proceedings.  If appropriate, FCL will instruct solicitors to assist the recovery of the debt from the borrower and any guarantor.  FCL will pay to investors, in their proportionate share, any funds successfully recovered less costs incurred.  

Where FCTL (Funding Circle Trustee Limited) holds an All Assets Security Agreement in respect of a particular loan, that agreement aims to secure all monies due to investors on the Funding Circle platform.  If FCTL is required to enforce the security agreement, any proceeds of recovery will become available to investors (after costs of enforcement).

It is possible that the proceeds will not be sufficient to pay the investors in full.  If that is the case, the investors shall only be entitled to their proportionate share. In addition, there may be other creditors of the borrower that have claims that may be recovered in priority to those of FCL, so the existence of an All Assets Security Agreement is not (and should not be considered as) a guarantee of full repayment in the event of a borrower’s failure. In the event that Funding Circle is able to recover interest in addition to the outstanding principal, both the recovered principal and interest will appear in the "recoveries" section in your summary tab.

Where the loans are part of a large asset finance loan, the security will be with a different subsidiary, called Funding Circle Asset Finance (“FCAF”).  In the event of any missed payments or other default by the borrower, FCAF may take possession of the assets, which may include entering the borrower’s premises.  Upon recovery of the assets, FCAF may sell the assets.  In these circumstances, any asset valuation report will be indicative only and, accordingly, any sale proceeds may be lower than the estimated value in the report.  FCAF is under no obligation to sell the assets for the value set out in the asset valuation report.  FCAF shall hold and manage any funds received and (after allowing for costs of recovery and sale) enable the funds to be distributed to the investors (in their proportionate shares).

In the unfortunate circumstances of a missed, late or partial payment on any of your loan parts, Funding Circle will endeavour to keep you regularly up-dated.  We will up-date you through your My Account page of the Funding Circle website.

 

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