RS seeking access to stimulus schemes from the government

RateSetter, one of the UK’s biggest P2P lenders with more than £800m on its loan book, has called on the Bank of England and the Treasury to allow it access to stimulus schemes that provide liquidity to banks.

“There are established schemes run by the BoE that pump liquidity into the system in the event of these situations,” said Rhydian Lewis, chief executive of RateSetter. “Now that P2P lending is fully regulated, this is a conversation we need to have.”

It seems that, at the moment, all P2Ps have been excluded from lending under the business interruption scheme, which would give them an 80% government guarantee for any loans.  In my opinion, Ratesetter should absolutely NOT be able to participate in this scheme as it is mainly personal, not business, loans.  I looked into applying for the various forms of state aid last night and it does appear they are throwing money around like confetti.  For our small family business I can apply for a £10,000 grant (via local council), furloughed employee wages (via HMRC), and also a business interruption loan (via one of 40 lenders).  How quickly any of this money will come through is a different matter.  But people who borrow for personal use should not be accessing this money. However, as in fact a lot of small business owners will take personal loans for their business then I can see that moral hazard is only going to grow as so much money is being thrown around with so little diligence (in fact NO diligence) that it is inevitable that overall lending standards will drop and moral hazard spread to existing loans where borrowers will start thinking 'why am I the only mug who has to pay his loans back'  

Given that RS is supposed to be focused on personal, not business, loans, and is in any case looking to raise funds or sell itself, then it does not appear they will be able to participate as a lender in the business interruption scheme, and indeed they are still not shown as a lender on the British Business Bank website.

Interestingly we were talking about this today.  Most people I know are actually significantly better off.  Incomes have generally held up (govt guarantee etc as stated) but expenditure has completely fallen off a cliff.  People are spending money on utility bills and supermarket items but thats about it. No fuel, restaurants, going out, cinema, holidays - barely anything.  Its an absolutely bizarre situation but if you have managed to keep your job and maintain your income then you are more than likely better off than you were before.

It is also worth considering that as RS investors sampling our own experiences, there is element of selection bias - in order to put money into RS you have to be in a position to have 'spare' money over and above your living expenses on a regular basis.

The people who may be hardest hit will be those who were already scraping by, just maintaining living expenses, and thus very unlikely to appear here on RS. Those people are also more likely to be in jobs that are at risk due to the types of contracts involved (zero hours etc.).

What is impossible for us to know is what the intersection is between RS borrowers and the people being impacted the most by CoViD-19.

It would be interesting to see if they ever publish any breakdown of the previous employment of the 850,000 extra people who signed up for Universal Credit in the last 2 weeks of March. That might give some clues.

And finally, if you look at the RS website on the Borrower section, it has two extra sections in addition to Personal Loans:

Dealer Finance - appears to be lending to Car Dealers to enable them to grow their businesses. Do we have a sense of the impact of all this on car purchases?

Property Finance - appears to be lending to individuals and companies to enable them to develop property. Again, do we have a sense of the impact on these businesses? Construction will have slowed but may not have fully stopped. The property market is expected to significantly drop.