Managing risk
The money you lend at Zopa is protected using all the
safety measures banks use... plus a few more.
Low bad debt rates
Zopa has plenty of safeguards in place to make lenders' money available only to credit-worthy borrowers, but we also provide lenders with predictions for the bad debt that they should expect in each of our markets - this allows each lender to account for this when setting their interest rates.
We are constantly refining our approval processes but will also review these bad debt guidelines on a quarterly basis if the performance of our loans suggests this is necessary.
This chart below shows how the loans that have been issued in all our markets (not listings) have performed versus our expectations.
This shows that loans issued more than two years ago have performed far better than our expectations. Loans issued one to two years ago have have performed worse than expected, but performance on more recent loans has recovered considerably. These changes in performance are a result of worsening national economic conditions coupled with adjustments we made to our approval criteria to produce bad debts more in line with predictions.
Safety measures
- Everyone who wants to borrow is identity-checked, credit-checked and risk-assessed. Zopa's underwriters review every loan application to ensure all borrowers have a good credit history. People with CCJs, high levels of unsecured debt or poor histories of credit repayment are prevented from borrowing.
- To diversify any risk, your money is spread across a number of borrowers. If you lend £500 or more, your money is spread across at least 50 borrowers.
- A collections agency chases any missed payments on the lender's behalf. This is the same process that banks and other financial institutions use.
- You're protected against fraud. If someone accesses your account without your permission, then you're not liable for any losses that result (provided you've kept your personal details secure).
- We give you an estimate of the bad debt you're likely to experience. This allows you to take it into account when you set your rates.
- We have made a number of arrangements to take care of lenders' funds in
the unlikely event that Zopa goes out of business.
- Zopa is not involved in the contracts with your borrowers, so they remain legally binding and repayments will continue to be made.
- Any money you transfer to Zopa is held in a segregated bank account to which neither Zopa nor its creditors have any claim.
- We have contractually agreed with our collections agency that they will manage any collections activity for lifetime of any loans outstanding. Each month we set aside enough money to cover these costs in a segregated account.
Zopa as a company
- Zopa is regulated by a wide range of official bodies
- Zopa is backed by the same investors that backed eBay, Skype and Betfair
- Zopa was set up by many of the team that launched Egg
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