Following our announcement of moving to fixed interest rates for all new loans, on Monday, 28th September we will be updating the terms & conditions for both investors and borrowers. We’re also taking this opportunity to update and simplify other clauses, set out below.
What you need to do
From next week, if you’re an investor you’ll be required to re-accept the loan conditions next time you place a bid or buy a loan part, as the updates below are included in the loan conditions.
If you’re a borrower, there’s nothing you need to do other than read the new conditions.
- We’re changing the term ‘lender’ to ‘investor’ so the T&Cs are consistent with the website.
- Clause 4 – we’re removing references to auctions and adding that all new loans will be listed at fixed interest rates.
- Introduction paragraph 5 – we’re clarifying there is one borrower contract and how it works.
- Clause 12.4 – the term novation is changing to assignment as it better describes the way in which the transfer works, on default of a loan or sale of loan part on the secondary market. Investors will now assign their rights to another investor or to a Funding Circle company on default of a loan, and the loan conditions provide that the new investor becomes party to the loan and takes on any obligations of the transferring investor. This has no impact on you but helps with certain regulatory analyses.
- Clause 12.4 – we are removing the option to, and the 7 day window for, opting-out of the collections process. This means our collections team will be able to start the process faster than before, and work to recover the debt outstanding on your behalf. The opt-out provision was originally included within the terms when the collections process was outsourced, and has been used twice by investors out of a total of approx. 400 loans which have defaulted since 2010. Since bringing this function in house, where we have a dedicated team of specialists working to make recoveries on your behalf, the recoveries estimates have greatly improved: the current actual recovery estimated is 19.3p in the £, in comparison to 9.2p before, and across all loans the estimated recovery within 5 years of default is 40p in the £.
- Changes to clause 3 to reflect the move to fixed interest rates for all new loans, where Funding Circle sets the interest rate of a loan before it’s listed on the marketplace.
- Changes to paragraph 4 of the introduction and clause 3.12 to clarify how the borrower contract works.
- Change to clause 1.5 – to add a borrower warranty and representation that it does not expect the information provided to change in any material way in the next 6 months, and an undertaking to update us if any information is likely to materially change.
- Clarification in clause 4.3 that the interest rate stated in Key Contract Terms will not change.
- Clause 8.4 – changes to clarify that a loan is assigned rather than novated.
- Change to clause 8.7 to reflect that if we agree a payment plan, we can verify whether you can afford this by requesting information and doing credit checks.
- Clause 9.2(b) – clarification that we can terminate membership if there is a breach of any security document, a facility letter in connection with property loans or any other documents arising out of the loan made on the platform
If you have any questions about the above, please don’t hesitate to contact us and we’ll be happy to help.
The Funding Circle team