Frequently asked questions

1. Who can lend at Zopa?

Anyone aged 18 or above who is a UK resident, has a UK current account and is not lending in the course of a business can lend at Zopa without restriction.

If you already or intend to lend in the course of a business, we're sorry to say you won't be able to lend at Zopa.

2. What's the minimum/maximum I can lend?

Once you've joined as a lender you can lend anything from £10.

3. What returns can I expect?

Zopa is a marketplace, not a bank, so we cannot guarantee any level of returns. Your returns depend on the rates you set, the credit level of the borrowers you lend to, and the amount of bad debt you experience.

Over the last 6 months lenders have lent their money out at an average rate of 4.7% (after charges and actual average annualised defaults).

4. How long can I lend my money out for?

You can choose from two terms at Zopa: Shorter and Longer. Offering your money in the Shorter term means you will be lending to borrowers getting a 1-3 year loan, while the Longer term is aimed at borrowers looking for a 4-5 year loan.

It’s important to note that, unlike in a traditional savings product, you will receive monthly repayments from your borrowers. This means that your savings aren’t tied up for a fixed duration, but rather recycled (if you use our Auto Top Up functionality) into new loans or kept in your Zopa holding account until you withdraw the funds or lend them out to our borrowers again.

Should you ever need access to your money before it is due to be repaid, we also offer Rapid Returns, which allows you to cash out some or all of your outstanding loans.

5. Am I lending all my money to one person?

No. To diversify your risk you can spread your funds across a number of borrowers, you can lend in chunks as little as £10.

When you create a Lending Offer on the Zopa Markets we will automatically divide the total you are offering into £10 chunks, for example if you're offering £2000 this will be lent out to 200 borrowers. As the lender though you can choose to lend however much you want to each borrower. The more borrowers you spread your funds across the more you are dispersing your risk.

6. Can a business lend through Zopa?

Yes, provided that your business is not a lending business and will be lending for investment reasons only and not engaging in the trade of money-lending. If you are proposing to or already do engage in the trade of money-lending we're sorry to say you won't be able to lend at Zopa.

7. How do I lend my money out?

To get your money on the marketplace and make it available to borrowers, you need to make a lending offer. You can do this from the Lending Offer Summary page of your MyZopa account.

Once you've made (and funded) your lending offer, your money is made available to borrowers. We then match your offer with borrower requests, and your money is combined with other lenders' to make up the full loan amount. Every lender receives the rate they set for their money, and the borrower gets a blended rate of all these different rates.

8. How should I decide on my rates?

The rates you set determine how quickly your money gets taken up by borrowers, as well as the level of return you ultimately get.

When you create your non-Safeguard offer in your Zopa account you will be able to choose your rates. When choosing your rate you should consider the pre-tax return that you would like after fee and expected default, and whether your rate is competitive with other lenders.

It is important to remember that you only earn a return on money that is currently lent out. As you receive back some of your lending every month, you will need to re-lend this money to get the full amount of interest.

Please note that the popularity of lending through the Safeguard offer means that you are currently unlikely to lend your money out quickly through the non-Safeguard offer.

Find out more about how the Safeguard offer works.

9. Will I know who my borrowers are?

You get to see a fair bit about your borrowers, although for security reasons we don't show you their full name or their address. You can see their username, their age, their home city, as well as how much they borrowed and for what.

In addition, they can also send you a little message. Typically borrowers use this to explain a bit more about what they're going to do with the loan or just to say thanks.

10. How long will it take to get my money lent out?

If you're offering through the non-Safeguard offer you're currently unlikely to lend your money out quickly. This is due to the popularity of the Safeguard offer, which means Safeguard is funding all new loans through Zopa and attracting a record number of credit-safe borrowers seeking competitive rates. With faster lending than ever before, Safeguard is a great way to grow your savings quickly.

It's easy to switch to Safeguard - just sign in to Zopa and use the Try Safeguard offer button on your dashboard.

Find out more about how the Safeguard offer works.

11. If my money is lent out, can I get it back or sell my loan on to someone else?

Yes! If you need access to money you've lent out before your borrowers are due to pay it back, you can use Rapid Return to cash out some or all of your market loans. Once you've confirmed that you want to cash out some loans, we transfer them to the lowest bidding lender in that market to recover your remaining capital from their offered funds. Zopa charges a 1.0% admin fee for all successful transfers made via Rapid Return. All loans except the following are eligible to be cashed out using Rapid Return:

• Loans made via Zopa Listings can't be cashed out. This is because Listings required each lender to individually choose each borrower whereas Rapid Return works by automatically matching your loans to another lender and we cannot assume they'd be happy to lend to any given Listings borrower. (Zopa stopped offering new loans via Listings in July 2011)
• If the borrower has ever missed a repayment, you won't be able to cash out of the loan. This is because you would have some privileged information about the borrower's payment performance that another lender might not have access to, and they may not choose to lend in these circumstances.
• You can't cash out loans where a repayment from the borrower is in processing. This is to ensure that 'ownership' of a loan does not change hands during the repayment processing process.
• For those of you who lent under a Consumer Credit Licence in the past, you won't be able to cash out loans you made under your licence. This is because your borrower(s) will have signed contracts with you that could only be taken over by new lenders with their own CCL. Not only does Zopa no longer facilitate lending under individual CCLs, but it wouldn't be a user-friendly experience for borrowers to be asked to re-sign new contracts with new lenders during the life of their loan. Of course, you will be able to cash out any loans you've made since revoking your Licence, subject to the criteria mentioned above.

12. Do I have to pay a fee to lend?

Lenders pay an annual equivalent 1% fee on the amount they lend to borrowers. The fee is accrued on a daily basis equivalent to 1% p.a. and deducted monthly from their holding account balance. They are not charged for money which has not been lent out.

Here is an example: A lender lending £1,000 at 7% would earn £70 of interest each year if the money is always lent out and paid back. They would pay a fee of 1%, or £10, in total.

We deduct the fee from the holding account balance on a monthly basis (27th of each month).

If a borrower defaults on part of their loan, the lender is not charged a fee for that part - that would be stupid. And similarly, if a borrower repays early, the lender pays no fee on the portion of the loan that has been repaid.

13. Do I have to pay tax on the money I earn by lending?

All returns are paid without any tax - even basic rate - deducted, so you should declare your gains to the Inland Revenue. At the end of the tax year we'll make an annual income statement available to you to download from your account showing the total gross interest you've received over the previous 12 months, less any bad debt and fees. For more information on how to declare your Zopa earnings please see here.

Please also note that HMRC don't currently permit lenders to offset any bad debt losses against their interest gains. We don't consider this to be fair and are lobbying the Government and Treasury for Zopa lenders to be treated in the same way as commercial lenders.

Please note: Zopa does not provide advice on tax.

Use the calculator below to help estimate the rate you could earn after fee, tax and expected default.

Estimate your return:

• Marginal tax rate: 20% 40% 50%
• Market: A* Shorter A* Longer A Shorter A Longer B Shorter B Longer
• Offer rate: 20.0% 19.9% 19.8% 19.7% 19.6% 19.5% 19.4% 19.3% 19.2% 19.1% 19.0% 18.9% 18.8% 18.7% 18.6% 18.5% 18.4% 18.3% 18.2% 18.1% 18.0% 17.9% 17.8% 17.7% 17.6% 17.5% 17.4% 17.3% 17.2% 17.1% 17.0% 16.9% 16.8% 16.7% 16.6% 16.5% 16.4% 16.3% 16.2% 16.1% 16.0% 15.9% 15.8% 15.7% 15.6% 15.5% 15.4% 15.3% 15.2% 15.1% 15.0% 14.9% 14.8% 14.7% 14.6% 14.5% 14.4% 14.3% 14.2% 14.1% 14.0% 13.9% 13.8% 13.7% 13.6% 13.5% 13.4% 13.3% 13.2% 13.1% 13.0% 12.9% 12.8% 12.7% 12.6% 12.5% 12.4% 12.3% 12.2% 12.1% 12.0% 11.9% 11.8% 11.7% 11.6% 11.5% 11.4% 11.3% 11.2% 11.1% 11.0% 10.9% 10.8% 10.7% 10.6% 10.5% 10.4% 10.3% 10.2% 10.1% 10.0% 9.9% 9.8% 9.7% 9.6% 9.5% 9.4% 9.3% 9.2% 9.1% 9.0% 8.9% 8.8% 8.7% 8.6% 8.5% 8.4% 8.3% 8.2% 8.1% 8.0% 7.9% 7.8% 7.7% 7.6% 7.5% 7.4% 7.3% 7.2% 7.1% 7.0% 6.9% 6.8% 6.7% 6.6% 6.5% 6.4% 6.3% 6.2% 6.1% 6.0% 5.9% 5.8% 5.7% 5.6% 5.5% 5.4% 5.3% 5.2% 5.1% 5.0% 4.9% 4.8% 4.7% 4.6% 4.5% 4.4% 4.3% 4.2% 4.1% 4.0% 3.9% 3.8% 3.7% 3.6% 3.5% 3.4% 3.3% 3.2% 3.1% 3.0% 2.9% 2.8% 2.7% 2.6% 2.5% 2.4% 2.3% 2.2% 2.1% 2.0% 1.9% 1.8% 1.7% 1.6% 1.5% 1.4% 1.3% 1.2% 1.1% 1.0% 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0%
• What you get:
  After 1% fee, tax & expected default
  4.3%

14. Where is my money held?

When you transfer money into Zopa it is put into a segregated RBS account. It is held there until the moment it gets lent out, when it is transferred to the borrower.

This account attracts no interest but Zopa does not profit from it, and the money does not form part of Zopa's assets. Which means, in the unlikely event of Zopa going out of business, your money would be completely safe.

15. How safe is my money?

To protect lenders' money, we use all the safety measures a bank uses - plus a few more.

• Everyone who wants to borrow is identity-checked, credit-checked and risk-assessed
• To diversify risk, your money is spread across a number of borrowers
• A collections agency chases any missed payments on your behalf (exactly the same process used by banks).
• You're protected against fraud
• We tell you how much bad debt you should expect, so you can take that into account
• Until your money gets lent out, it is held in a segregated RBS account. This means it does not form part of Zopa's assets and is 100% safe in any eventuality.

For more details, click here.

16. Can I lend via a SIPP?

Unfortunately not. We currently do not have the administrative or legal means for members to lend via a Self Invested Personal Pension.

17. I'm resident in the Channel Islands/Isle of Man - can I join to lend?

Unfortunately not. HMRC have granted Zopa dispensation from withholding tax on lenders' returns - this means they can be paid gross, and it is the lender's responsibility to declare it. This applies to lending and borrowing that occurs within the UK.

For tax purposes, HMRC consider the crown dependencies (this includes the Channel Islands and the Isle of Man) as a non-UK residency. HMRC have advised us that in such circumstances, either the person paying the interest (i.e. the borrower) or Zopa itself must withhold tax. Unfortunately, logistical limitations prevent Zopa being able to permit off-shore lending at this time.

18. If a borrower is late paying, what do I need to do?

Absolutely nothing. We will chase up any missed payments on your behalf and will provide updates via My Loan Book. If your late payer is proving difficult to get back on track we might employ a collections agency to assist with the collections process. This is at no cost to you as the agency charge the borrower for their activity.

19. What happens when a borrower misses their repayment(s)?

Zopa receives notification from the banking service that a Direct Debit repayment has failed. This could be due to insufficient funds in the borrower's account, or an issue with the Direct Debit instruction. Unless there is an exceptional mitigating factor that has affected the ability to take payment (such as a technical issue), Zopa then pursues the course of action described below.

Establish contact and agree repayment

• On the day the Repayments team are notified of the failed payment, they attempt to make contact with the borrower by phone to establish the reason for missing the payment. If they are unable to speak with the borrower, the team follow up both by email and letter. The team continue to try to contact the borrower every few days until a response is received and the circumstances for non-payment can be determined.
• Usually this is a one-off occurrence due to personal circumstances, and the team will arrange for full repayment of the arrears, or if the borrower cannot afford to do so in one instalment, set up a plan to pay off the arrears in instalments. In the latter case, Zopa will continue to collect their monthly commitments and maintain contact with the borrower to ensure the arrears repayments are met also.
• In certain cases the borrower may be undergoing financial hardship and cannot afford to keep up with their monthly commitments; the Repayments team will try and come to a fair arrangement with the borrower so a proportion of their monthly commitment is still met. This may be done directly with the borrower, or through a Debt Management Agency (DMA) if they have nominated one. Zopa maintains contact with the borrower and/or DMA to ensure the payment plan is honoured and reviews the individual's circumstances on a regular basis.

Employing a Collections Agency

• In exceptional circumstances the borrower may not respond to our correspondence, or might fail to honour any promised action; Zopa may employ a Collections Agency to assist in the collections process, where the Agency's access to other tools and data sources could be of benefit. During this time Zopa will update the Collections Agency on a regular basis with an outstanding balance, to ensure interest accrued on failed repayments is taken in to consideration, as well as any further failed repayments.
• Zopa do their best to use assistance from a Collections Agency whenever the time is appropriate, so whilst there is no strict time frame for when they are involved the Repayments team will try and establish a relationship with the borrower during the first 30 days from the first repayment being missed before introducing a third party.

Notice of Arrears (2 months' arrears)

• If the borrower falls behind by at least two months' expected repayments, Zopa will send the borrower a Notice of Arrears, which includes an official information sheet on Arrears provided by the OFT.

Notice of Default (4 month's arrears)

• Zopa defines a default when a total value of four months of arrears have accumulated. At this point, Zopa will send the Borrower a Notice of Default, which includes an official information sheet on Defaults provided by the OFT.
• Once the Notice has been issued the customer has fourteen days to respond to it; during this time Zopa (or any Collections Agency that has been involved in the process) cannot make further contact with the borrower.
• If no satisfactory response is received, Zopa will consider next options. Typically this will be a request for lenders to assign the defaulted debt to P2PS Limited, to enable further action (including court proceedings) to be taken.
• Please note that if the borrower has been declared bankrupt and there are no available funds to release to creditors, or has successfully entered in to an IVA or Trust Deed, the debts will not be assigned to P2PS Limited. Equally, if the borrower is making an active attempt to make regular repayments through a repayment plan, Zopa may choose not to request assignment of the bad debt, depending on how much is being paid back. These regular repayments will be monitored on an ongoing basis, and a decision to request assignment of the debt will be considered regularly..

Assignment

• Zopa will instruct P2PS Limited to take an assignment of the bad debt from the lenders participating in the loan. Affected lenders are given 28 days' notice prior to the assignment, and have the opportunity to decline the offer from P2PS Limited. The borrower is also notified that this process has commenced.
• Once the 28 day period has elapsed P2PS Limited will provide Zopa with formal notification of the assignment. At this point, ownership of the debt has passed to P2PS Limited, and Zopa has no further responsibility to manage the loan, but may provide pertinent information on the borrower to the affected lenders at its discretion.
• Zopa sends a notice to the borrower confirming the assignment has occurred and the ownership of the debt has now passed to P2PS Limited, including a schedule of the debts for each lender and which have been assigned. The same schedule is provided to P2PS Limited who will then commence recovery activity with the borrower, including enforcement of the debt through the County Court where such action is sensible.
• There will be no financial consideration for the assignment. Where funds are recovered, these will be apportioned to the lenders who opted in to the assignment, after deducting the costs incurred by P2PS Limited in bringing the action.

20. What are the estimated bad debt rates?

Based on data provided by Equifax about our expected borrowers, and their many years of professional experience, our risk team has made their best estimates of the levels of annual bad debt expected in each market. That information is used to calculate the return after bad debt that is displayed to you on the lending screen.

Despite our risk teams efforts, it is important to consider that the actual level of bad debt you experience may vary from their best estimate.

Current Markets

MARKET	BEST ESTIMATE
A* Shorter	0.5%
A* Longer	0.4%
A Shorter	1.0%
A Longer	0.8%
B Shorter	2.9%
B Longer	2.3%

Old Markets

MARKET	BEST ESTIMATE
C Shorter	5.2%
C Longer	4.2%
Young Shorter	5.0%
Young Longer	3.1%

For more information on bad debt please click here.

21. Is Zopa covered by the FSCS?

Zopa is not covered by the FSCS guarantee scheme because we are not a bank and therefore cannot be included. The FSCS is designed to protect bank customers should their bank go bust because if a bank goes bust, the money their customers hold with them would otherwise disappear.

As Zopa never holds any customers' money, there is no risk to it should it go bust. When a lender puts money into Zopa or receives repayments from borrowers, their money sits in a trust account at RBS - it remains entirely separate from the Zopa business. Furthermore, a legally binding contract exists between every Zopa lender and their borrowers, unaffected by Zopa's commercial position. And Zopa has robust contingency arrangements in place to ensure that should for any reason it close, another business will take over, helping to ensure borrowers continue to pay off their loans and interest as scheduled. The 1% fee paid by Zopa lenders would be sufficient to pay for this on an ongoing basis.

1. Where can I see what's happening with my money?

In the Lending section of your Zopa account, please select Account from the panel on the left hand side. From here, the Pie Chart will show you where your money is, how much you have lent out and how much money you still have on offer on the marketplace. It will also show you any fees you have accumulated as well as any money you have not yet offered. The tables in this section of your account will also give you a breakdown of this as well as some additional information.

For a more detailed overview of your lending account please download our Guide to Lending.

2. How can I see who my borrowers are?

In the Lending section of your Zopa account, please select My Loan Book. Once here, you will see a table, click on your market (this will be underlined), a list of your borrowers will then appear. If you would like borrower specific information, click on the borrower for their individual details.

For a detailed step by step guide to My Loan Book please download our Guide to Lending.

3. How do I pay money into my Account?

When logged in to your account, go to the Transfer Money In section of Lending.

You can set up a Direct Debit that links to your nominated bank account and allows you to make a transfer request while securley logged into your account without having to go to your bank. You can also add money using a Bank Transfer or set up a Standing Order, details of how to do this can also be found in the Transfer Money In section.

4. I've sent some funds to Zopa. What happens now?

We may be processing your transfer. Whether you've set up a Direct Debit, Standing Order or sent some funds by BACS (bank transfer), we will send you an email to confirm when your transaction has been processed and the funds are available to lend.

Direct Debits can take up to 5 working days to be set up by your bank, once set up each transfer takes a further 3 to 4 working days.

Please note BACS transfers can take 3 to 5 working days for standard transfers; however, transfers sent via Faster Payments should only take 1 working day.

If you've already set up a lending offer it will be in a 'pending' state, waiting for these funds to be paid in. You can see whether you have created a pending offer by looking at the Lending Offers page: the pending offer is highlighted in pink.

5. How does Auto Top Up work?

When active, the Auto Top Up function in your Lending account ensures that any money transferred into your Zopa account or any payments you receive from your borrowers are automatically recycled and reoffered in the Zopa markets. Please note, Auto Top Up can only be active on one offer at any one time.

For a step by step guide of how to manage Auto Top Up please see our Guide to Lending.

6. When do I start getting repayments?

The first repayment you receive from a borrower will usually come just over one month after your money has been lent to them.

At the time of applying, borrowers choose their monthly repayment date. If you lent money to a borrower on the 15th of June and their chosen repayment day was the 28th of each month, the borrower would make their first repayment on the 28th of July. You would then receive this a few days later once the payment had been processed. Since this first payment is made more than a month after the borrower took out their loan, it would be slightly higher than subsequent monthly payments.

You can view your borrower's chosen repayment day of the month in My Loan Book.

7. Why do my monthly returns vary slightly?

The returns you get each month will often vary, for a number of reasons:

• A borrower's first repayment will almost always be slightly larger than the rest of their repayments (because their first payment usually happens over a month after they receive their money)
• Because your borrowers will have other lenders, their repayments have to be split. This may result in parts of pennies being owed to you - we keep a track of these and pay them into your account once you reach a full penny
• Sometimes a borrower repays early or is late with a payment.

8. Can I change my rates?

Yes but only on money that has not yet been lent out or is not yet in processing. To change the rates on money being offered, please go to Lending Offers on the panel on the left hand side of the Lending section of your Zopa account and select Details underneath your lending offer followed by Edit Offer.

9. Can I reinvest my funds as they come back from my borrowers?

Yes, provided you have the Auto Top Up functionality switched on. This means any new money you pay into your account and funds from borrow repayments will be automatically added to your most recent lending offer (in chunks of £10). When you create a new lending offer, you will be asked whether you want Auto Top Up turned on or not.

If you'd rather reinvest the money yourself, or have it added to a different lending offer, you can sign in to your account, go to your Lending Offers, and select Manage Auto Top Up. Click here for more details on how to use Auto Top Up.

10. How do I change the amount I lend to each borrower?

To edit the amount you want to lend to each borrower on the Markets go to the lending section of your Zopa account, select Lending Offers followed by Details under the name of your lending offer then choose Edit Offer. Scroll to the bottom of the page from here you can set your maximum exposure. This is the maximum amount you are willing to lend to any one borrower from a single lending offer.

11. What does money in 'Processing' mean?

When some of your money shows up as being in 'Processing' it means that it has been matched to a borrower, or that that borrower's application is now being reviewed by our underwriters. Once reviewed, the borrower is either approved or declined. If we approve the borrower, your money will be lent out. If we decline the borrower, your money will not get lent out, instead, it will go back onto the marketplace and be made available to other borrowers. It will show up as being 'Offered' in your lending summary screens.

12. How can I transfer money out?

Go to the Lending section of your Zopa account and select Transfer Money Out from the panel on the left hand side and follow the simple instructions on screen. The money should be back with you within 3 to 4 working days.

13. Can you manage my account for me?

Unfortunately not. Since Zopa is not a bank legal restrictions prevent us from doing so. However, we are more than happy to answer any queries you may have, or provide assistance simply click here to contact us.

14. I've paid in funds to Zopa and received confirmation - why do I still have no funds to lend out?

That's because you are already offering your funds. When you registered with Zopa, you probably created a lending offer. This would be highlighted in pink, indicating it's in a pending state and waiting for you to fund your account.

As soon as you have funded your account with at least the amount you created your first lending offer with, the money would have been allocated to this lending offer, which as a result would no longer be highlighted. Your funds therefore are already being offered to borrowers in the marketplace and so you have no further funds to offer.

You can view details of your offer in the Lending Offers page, as well as on the Dashboard.

15. I've nothing available to lend in my account: does this mean all my funds are lent out?

Not necessarily. It may mean that you have allocated all your available funds to lending offers. Some of this money may have already been matched and lent but you may also still have funds waiting to be matched. A summary of this appears in your Account page and Dashboard on the Lending section of your Zopa account.

Note that funds are lent in denominations of £10, so you might have a few pounds and pence left over.

16. My money isn't getting lent out - what should I do?

The popularity of lending through the Safeguard offer means that you are currently unlikely to lend quickly through the non-Safeguard offers.

This popularity means that Safeguard is now funding all new loans through Zopa and attracting a record number of credit-safe borrowers seeking competitive rates. With faster lending than ever before, Safeguard is a great way to grow your savings quickly.

It's easy to switch to Safeguard - just sign in to Zopa and use the Try Safeguard offer button on your dashboard.

Find out more about how the Safeguard offer works.

17. What guidance is there from HMRC on declaring Zopa earnings?

We received the following advice from an HMRC officer:

This guidance is intended to clarify matters and not to be decisive. Further guidance is available on HMRC website as set out below.

For almost all Zopa lenders, their lending is not a money-lending trade, but an investment activity. They should, therefore, simply return the interest received in each financial year, net of Zopa costs. Lenders will receive interest without tax having been taken off. Clearly, if interest is not received at the return date because of recovery problems or any other reason, the lender should not return it (i.e. they are not required to accrue). If the interest on a loan proves irrecoverable, there has been no amount received so nothing should be returned. In the event that the principle of a loan proves irrecoverable, however, the lender cannot claim that loss against interest that has been received on other loans.

Lenders will need to show the interest they receive in a tax year on their self-assessment returns. Anyone who does not have to fill in a tax return each year should contact their Tax Office and tell them about the interest they are receiving. If they pay tax under Pay As You Earn (PAYE), the Tax Office will normally adjust their tax code to collect the tax that is due on the interest. In some cases, they will have to fill in a tax return and the tax will be collected through their self-assessment.

See HMRC website at http://www.hmrc.gov.uk/manuals/saimmanual/SAIM2400.htm. Lenders may also wish to consult other paragraphs within the Savings and Investment Manual.

For a small number of lenders there may be a possibility that they are carrying on a trade of moneylending. This would require the activity to be carried out with a degree of organisation by the lender (as opposed to any activity carried out on his/her behalf by Zopa).

This question can only be considered with reference to the facts of each individual case. We have provided below general indications of the type of features that will signify a trade but these will not always conclude a trading activity. See also HMRC website at http://www.hmrc.gov.uk/manuals/bimmanual/BIM62201.htm.

The main features that would point towards this level of organisation would be where:

• There are a large number of loans being made. An individual would need to make a significant number of loans for there to be sufficient diversity of lending to possibly indicate trade. HMRC cannot give an absolute figure for what is a significant number of loans but would expect the number of loans to run into the hundreds. In considering the number, HMRC would include any lending activities carried on outside Zopa
• The lender would need to have their own strategy, aside from the activities carried out on their behalf by Zopa, to manage the risk of default.
• The lender would need to have their own strategy, aside from the activities carried out on their behalf by Zopa, to seek to ensure a profit out of the activity.

Holding a consumer credit license is a pointer towards a trade but, by itself, does not mean the lender is carrying on a trade.

If anyone is in doubt about whether their activities, or planned activities, are a trade or not, they should speak to their accountant or make an appointment to speak to an adviser at an HMRC enquiry centre.

If a lender is carrying on a trade of moneylending they will need to notify HMRC that they have started trading.

They will need to return their income on an accruals basis, providing for any doubtful debts as necessary. They may be able to claim some costs. They will probably need to seek the advice of an accountant on these points.

18. What happens in the event of my death?

In the event of the death of a lender the loan contracts still stand but the benefit passes first to the estate of the deceased and then, if appropriate, on to the ultimate beneficiary. The value of the portfolio is calculated on the date of death as the total capital outstanding plus any funds not yet loaned out. Once Zopa are informed and sent a certified copy of the death certificate we would stop the account from lending more funds and provide details of the account to the administrator or executor. Before any financial changes can be made to the account we would require a certified copy of the Grant of Probate for our records.

Zopa will continue to recover repayments and interest earned on existing loans for the benefit of the deceased lenders estate, until we are permitted to distribute the funds as instructed by the executor, which can be monthly, quarterly etc as agreed with the executor. This process continues until the outstanding loans are fully repaid or otherwise come to an end. Be aware the continuing receipt of interest on existing loans may give rise to a tax liability and the executor will need to address this with Her Majesty's Revenue & Customs or other tax authority as appropriate. Unfortunately, we cannot recover funds that are still on loan to borrowers and not due to be repaid yet; in order to retrieve these funds, the executor, administrator or ultimate beneficiary would need to allow the repayments to accrue within the holding account, before withdrawal.

There is an option to sell the portfolio of loans, for a 1% fee, rather than wait for them to be repaid over time. This can be done through our Rapid Return facility although there are certain restrictions to this policy, which can be found here. If the executor wishes to utilize the Rapid Return facility, upon receipt of satisfactory evidence and compliance with any other Zopa requirements, the personal representative will be permitted to utilise the Rapid Return facility on behalf of the account holder's estate. The standard conditions for this facility apply and any loans that cannot be transferred will continue to run their course; the representative will have access to the funds as and when they are available.

Zopa is unable to change the name on a lender's account as the agreement itself cannot be transferred into another individual's name. A lender is however able to make a request in their Will to leave the funds in their Zopa account and proceeds to a particular individual, although this will be subject to the laws of probate. The important things to consider are how they want the available funds at the date of death to be administered as well as any monies not yet due, i.e. capital outstanding on active loan contracts and the expected interest and repayments on them.

In both cases the more explicit the instructions the better (i.e. who the recipients are and how much each should receive) as we have a duty to act in strict accordance with the individual's Will. In order to meet your wishes, we would simply require the appropriate documentation from your nominated solicitor to carry out these requests. Once probate is completed and we have the relevant documentation we would then deal directly with the beneficiary.

19. What happens in the event of a borrower's death?

In the event of the death of a borrower the loan contract still stands. Once Zopa are informed and sent a certified copy of the death certificate we would give the executor all the details of the loan and a settlement figure. The estate can either pay off the outstanding amount or set up a new direct debit to their own bank account to continue the monthly payments.

Where funds were paid to a borrower into a joint account, any outstanding sums become the liability of the borrower's estate and are immediately repayable out of the estate assets as outlined and agreed by the borrower in the Zopa Principles and Loan Conditions.

The borrower's estate will not become a Zopa member in the ordinary course and further funds may not be borrowed by the estate of the deceased.

The debt remains part of the estate and is subject to our existing contractual obligations. If no payments were received then the debt would be referred to our Collections Agency in the usual way - though obviously with tact and understanding.

20. Is Zopa covered by the FSCS?

Zopa is not covered by the FSCS guarantee scheme because we are not a bank and therefore cannot be included. The FSCS is designed to protect bank customers should their bank go bust because if a bank goes bust, the money their customers hold with them would otherwise disappear.

As Zopa never holds any customers' money, there is no risk to it should it go bust. When a lender puts money into Zopa or receives repayments from borrowers, their money sits in a trust account at RBS - it remains entirely separate from the Zopa business. Furthermore, a legally binding contract exists between every Zopa lender and their borrowers, unaffected by Zopa's commercial position. And Zopa has robust contingency arrangements in place to ensure that should for any reason it close, another business will take over, helping to ensure borrowers continue to pay off their loans and interest as scheduled. The 1% fee paid by Zopa lenders would be sufficient to pay for this on an ongoing basis.

21. Where have the C&Y markets gone?

In October 2012 we made improvements to the Zopa Markets and how we group the UK's safest borrowers, to make it easier for lenders to set their rates and make great returns.

What improvements were made?

New borrowers are no longer allocated to the C&Y market. However, lenders who had offers in the C and Y markets are able to maintain their lending offer, allowing eligible C and Y market loans to be exchanged via Rapid Returns.

Why did we do this?

The Y Market

We moved the Y market into the A*, A or B market so that young borrowers are now grouped more fairly based on their credit rating, rather than just their age. As such, this will not affect the bad debt estimate in each market. This will also help attract safe, young borrowers to Zopa. As many of our lenders enjoy helping young people to buy their first car, the age of borrowers (at the time they take out the loan) can be found in lenders' loan books.

The C Market

Due to our careful checking, we only accepted a very small number of borrowers in the C market. This meant only a small amount could be lent to C borrowers and lenders tended to offer lower rates to compete in this market. To help lenders get better rates, and having received feedback that managing rates across so many markets was time-consuming, we removed the C market. We now accept only the highest rated C borrowers into the B market. These borrowers behave like B borrowers and will not affect the bad debt estimate of this market.

View more improvements to the Zopa markets FAQ.

22. How do I acquire Rapid Return loans from other lenders?

Rapid Return allows Zopa lenders to acquire eligible loans being offered by other Zopa lenders. It happens when lenders wish to access their money before their borrowers are due to pay it back.

Who can acquire loans via Rapid Return?

All Zopa lenders can acquire loans via Rapid Return automatically for any market they are offering to. The C&Y markets no longer contain new borrowers and lenders can only lend to these markets by acquiring loans via Rapid Return.

When choosing rates for each market lenders should always consider the required pre-tax return after fee and expected default.

Which loans may be acquired via Rapid Return?

• Only loans with a good and up-to-date payment history are eligible.
• Lenders can only acquire a loan via Rapid Return if they do not already own a loan to the same borrower which was created from the same lending offer.
• Lenders may acquire loans via Rapid Returns at a higher rate, but not any at a rate lower, than is being offered to each market.
• The loan amount acquired may not be a whole multiple of £10 due to repayments already made by the borrower.
• The time left on the loan may be less than the term of the market being offered to (e.g shorter or longer).

How does Rapid Return work?

A round robin matching process is used. For example, if there are many lenders offering at the same rate, each lender is allocated one loan and then their lending offer is moved to the back of the queue. The matching process will keep going round the queue at the same lending rate until there are insufficient funds, before moving to the next highest lending rate.

For offers in the C&Y market, the distribution column in the lending offer shows the proportion of all eligible loans that are currently held by Zopa lenders in these markets which are at or above the offer rate you've selected. However, these loans may never be offered via Rapid Return.

23. Can you tell me more about 1 year loans?

From February 2013, we’re offering 1 year loans to credit-safe borrowers through the Shorter markets. This should attract even more of the UK's safest borrowers and help savers grow their savings more quickly.

How can I offer to borrowers looking for a 1 year loan?

From February 2013, we’re amending the Shorter markets to offer loans to borrowers for 1, 2 or 3 years.

If you currently have money in a lending offer waiting to be matched to borrowers in the Shorter markets, this money will be matched to 1, 2, or 3 year loans. Similarly if you have Auto Top Up live on your account for the Shorter markets, then the money which comes back to you in repayments will be matched to 1, 2 or 3 year loans.

However there will be no change to the risk criteria of Zopa borrowers, so if you have money on offer in A* Shorter this will be lent to our A* borrowers.

How will this affect my existing lending?

Money that is currently lent out to borrowers will not be affected, as 1 year loans are only going to be offered from February 2013.

How does this change to the Shorter markets affect bad debt expectations?

Zopa reviews the bad debt expectation in each market regularly and our expert team of underwriters carefully check each loan application.

The bad debt expectations will not change with addition of 1 year loans to the Shorter markets. The 1 year borrowers, that you will lend to in the Shorter markets, have the same annualised bad debt expectation as the 2 and 3 year borrowers you are used to. You can find out more about bad debt expectations here

Will this affect the Zopa in each market?

These changes won’t affect how the Zopa is calculated or the position of lending offers in a market. But, depending on the rates set by lenders, an increase in the borrowers seeking loans in a market will mean that more money can be lent faster – meaning more interest for lenders.

Can I see whether I have lent to 1 year borrowers?

You can in your Loan Book, which you can access once signed in.

How do these changes affect my repayments?

A borrower repays the money you lend them in equal monthly installments. So if they borrow for 3 years, you will receive 36 repayments. For a 1 year loan, you will receive the money in 12 repayments. However, Zopa’s responsible borrowers often pay back their loan early, so you see a full repayment in your holding account before the end of the loan term.

Remember that money in your holding account doesn’t earn interest, so it is helpful to use Auto Top Up to automatically put it into a lending offer or to regularly check your holding account.