RateSetter returns £384m to 45,000 investors after taking over Metro Bank

About 45,000 investors in peer-to-peer lender RateSetter had their accounts closed and their funds returned after it was seized by Metro Bank last August.

Customers began receiving the emails from last Tuesday after the High Street bank in February gave investors two months’ notice that it had bought £384m worth of loans in early February, said to be earning around 8 per cent a year.

However, some emails detailing investor account closures were only received on Monday, with 19,000 withdrawal requests delayed last week.

RateSetter was picked up by Metro Bank last August

RateSetter was picked up by Metro Bank last August

One of those, seen by This is Money, said, “On April 2, 2021, the investment side of RateSetter closed. Your funds have been fully returned to your holding account.

The closure of 45,000 accounts over the past week came as Metro Bank on Monday began offering RateSetter loans through its 77 branches for the first time since its £12m takeover last summer.

Consumers can borrow between £1,000 and £25,000 over a period of between one and five years.

Loans have been available online through the RateSetter website since last summer, and Metro Bank’s loans page still redirects applicants to the website, but the announcement and the £384m back-book purchase mark the next steps in the bank’s integration with the platform.

Applicants must be over 21 years old and earning £12,000 per annum or more. Personal loans have a representative APR of 4.9 percent while loan rates start at 3.9 percent. Borrowing £10,000 over five years through RateSetter would return borrowers £11,004.60.

The best rate in the market is available through Cahoot, which charges a representative interest rate of 2.8 percent. At this rate, the £10,000 loan would carry £718.40 in interest, at a cost of £286.20 less over the five-year period.

While online borrowers will find little difference, the fact that personal loans will now be funded from Metro Bank’s balance sheet marks another nail in the coffin of the idea of ​​lending funded by ordinary investors.

RateSetter was the largest peer-to-peer lending platform in the UK.  It allowed everyday investors to earn returns by financing personal loans to individuals

RateSetter was the largest peer-to-peer lending platform in the UK. It allowed everyday investors to earn returns by financing personal loans to individuals

RateSetter was the largest peer-to-peer lending platform in the UK with over 750,000 investors and borrowers, and was one of the few funded primarily by ordinary investors.

However, as a result of the pandemic, it cut the returns it paid investors in half last year before being cut by the bank, which was seeking to diversify its lending beyond mortgages.

Neil Faulkner, CEO of P2P comparison site 4thWay, told This Is the Money last year that “the more the loan book matches typical bank lending, the more likely the P2P lending business is to be sold to a bank.”

He added, “RateSetter has arranged a lot of standard, automated, and unsecured personal lending, so it fits that bill.”

But the move marks the end of an era, especially since RateSetter CEO Raydian Lewis has been one of the firm’s most optimistic about the future prospects of peer-to-peer retail investing.

Among the UK’s other “big three” lending platforms, Zopa has stepped back from its peer-to-peer roots after launching its own bank, while Circle of Finance has closed its doors to investors each day in order to qualify for participation in government support. Coronavirus loan schemes.

“For years, RateSetter has been claiming to have a better financing model than banks, and they clearly don’t,” Ravi Anand, managing director of business lender ThinCats, told This is Money last year.

P2P was a time response moment in the aftermath of the financial crisis.

For years RateSetter has been claiming to have a better funding model than the banks, which they clearly don’t.

The current corona virus crisis shows that alternative financing is suitable for those borrowers who are not properly processed by the banks, but the loaned capital must be on a large scale and stable which means that it is obtained through a bank or through institutional capital.

Then Metro Bank bought loans financed from 45,000 investors last February, amounting to 384 million pounds sterling, with these purchases being completed from the beginning of this month.

Investors began accessing their funds from April 2, with the sales most recently completed on Monday.

The email to 45,000 investors read: “RateSetter launched over ten years ago and has grown to be the most popular P2P platform in the UK, attracting over three-quarters of a million investors and borrowers.

We are proud to have achieved an average annual return of 4.4 per cent, while our credit management and our pioneering savings fund ensured that no one ever lost a penny of principal – a unique record that we have maintained throughout the current time of economic uncertainty even today.

“We wish our investors all the best for the future.”

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