Asked on 27 Jun 2019
Lets say I trust your company with my capital. To be invested. For P2P lending. What happens to my capital when your clients default on payments?
Through personal experience that money is locked up until a debt collector employed by the P2P company (or they themselves) can retrieve it. Unlike larger bankruptcies where bond holders can expect some money back (be it cents on the dollar), in the case of P2P lending chances are quite a bit slimmer I would say.
Hello! I’m Jin Wen from CoAssets Pte Ltd (“CoAssets”) and would love to give my two cents :) Every investment comes with their own set of risks. The main risk that comes with P2P lending is the default risk which is defined as the risk of the Opportunity Provider (“OP”) defaulting on repayments in full or in part.
Understanding Default Risk
In accordance to Monetary Authority of Singapore (MAS), a non-performing loan (I.e. loan default) occurs when a repayment remains unpaid at least 30 days past the due date. Source: https://www.mas.gov.sg/-/media/MAS/Regulations-and-Financial-Stability/Regulations-Guidance-and-Licensing/Securities-Futures-and-Fund-Management/Regulations-Guidance-and-Licensing/Circulars/CMI-27-2018-Controls-and-Disclosures-to-be-Implemented-by-Licensed-Securities-Based-Crowdfunding-Operators.pdf
What happens in the event of a default?
CoAssets will act on behalf of our investors to recover the defaulted amounts. We can choose to do this in a variety of methods with the main goal of maximising recovery for our investors.
Means of Recovery
CoAssets may engage third-party debt collectors or commencing legal proceedings.
In the case of legal proceedings, we may have to get a letter of authorization from affected investors to authorize CoAssets and legal counsel to act on their behalf. Legal fees may be borne by the investors if they want to proceed with legal actions. Under this entire process, the affected investors will be kept up to date on the recovery of funds and be notified should there be any material changes to the status of recovery.
Overall, it is advisable investors must do their own due diligence to determine if the products match their investment objectives and risk appetite.