#24871 Default seems preemptive

So I wrote and asked on 31/7/19


Can Investors please have a little more information on why this has defaulted please, when only one payment is late and then by only 2 weeks, as I for one have others that are far later that have not been defaulted, and indeed not even had comments raised.


the response is interesting nay staggering !

Thank you for getting in contact with us and apologies in the delayed reply.

I can ask the Case Manager to provide further information, however to manage expectations I cannot guarantee this will be done.

Initially, I would like to emphasise our commitment to understanding early defaults and maintaining an effective credit assessment process. We know that a loan defaulting early in the loan term is unexpected, and can raise concerns about our credit assessment process for borrowers applying for loans.

We have a robust and stringent Credit Assessment process at Funding Circle, and each business is thoroughly assessed before a loan offer is given, to ensure that the businesses you lend to are resilient. At the time the loan is offered, our Credit Assessment team must be confident that the business in question will be able to repay the loan, and that they have met our eligibility requirements. However, as you are aware, during the course of a loan term there may be a change in circumstances which cannot be foreseen at the assessment stage. This may happen at any point during a loan term and, though disappointing, unfortunately in some instances it is possible that a borrower may experience financial difficulties and fail to repay the loan amount. I can appreciate that it may be frustrating that this loan has been defaulted so early on but this is a very rare case and historically, less than 1% of loans originated within a given cohort have defaulted within the first 6 months. In regards to this loan and the credit assessment that it will have undertaken we have a very stringent credit assessment process that takes into account a very large number of factors, which includes using credit reference agencies within our checks as well as our senior credit assessors looking at each case and reviewing them.

At Funding Circle we take credit assessment very seriously and have strong processes in place to assess businesses before they are listed on the marketplace. Please be assured that any loans that default early are reviewed as would any loan that defaults at any stage.

Upon review, our Credit Assessment team have confirmed that this particular borrower passed the pre-assessment stages and that we would not have been able to predict the loan defaulting before it's first repayment. Furthermore, analysis has confirmed that the checklists for credit assessment were all correctly completed.

The additional review of this loan has identified that the initial assessment showed the company's credit report had no major adverse information at the time of application, and was assessed using our credit risk model; it achieved the median score of all UK SME businesses. The company's credit report showed no recent delinquencies on other credit accounts.

In addition to this, the director's personal credit reports showed no major adverse information at the time of application, and also achieved above the median score of all UK individuals.

Finally, the affordability of the new loan was assessed in conjunction with the company's last set of filed accounts, and recent bank statements, which show a healthy level of income immediately prior to the loan's acceptance.

With regards to your concern of a fraudulent application, we check for CIFAS flags on director and company reports in order to prevent outright fraud. In addition to this, we check for company directors for past insolvencies, which are often an indicator of unscrupulous applicants. Finally, we ask for a copy of recent bank statements in order to identify companies in immediate financial distress. On this occasion, the bank statements did not show anything untoward.

We are confident that the credit assessment process was carried out accurately, and the early default could not have been foreseen by Funding Circle however the case regarding this borrower is sat with our Collections and Recoveries team who are proceeding with court action.

I hope this helps, however if you have any further queries, please do not hesitate to contact us.

This Loan has been running nearly 3 years, my question was about why was it defaulted after missing 1 payment by 2 weeks

The arrogance of FC is breath taking. "... may be too busy ....". This company has totally lost the plot. The have forgotten that in order for the business to survive they need borrowers and lenders and without them they won't have a job. When a company has lost sight of this they are on the final leg to the end.

I almost feel sorry for the (interns?) poor souls dealing with investors at FundingCircle Towers. It strikes me that they are completely overwhelmed with incoming emails and questions, are having to rely on bulk standard replies, are getting precious little help form management, and the company is losing the plot.
There is an old PR adage- "get ahead of the story", which the management team should reflect on. The anger and groundswell of unhappiness amongst investors/mugs/ those feeling ripped off is in danger of doing further lasting damage to the company- all it takes is one of the old-media Sundays (such as the Sunday Telegraph) to alight on the abysmal lender-experience to really hit FC hard. 
In the hope that FC do read these posts- a suggestion, you get your CEO Sam to put a post up on this site, and to write to all lenders, giving an honest update and apology, promising that all lenders will be treated equally (so no queue jumping) and being straight forward and humble- There is an arrogance around FC which can easily become hubris, and hubris can easily become a death-spiral.