Defaults, Recoveries and Losses
Recognising and Reporting
Within the peer-to-peer sector there is no unified method for recognising and reporting defaults and missed payments. ArchOver’s approach is to provide clear, concise definitions and easy to understand data.
Zero Tolerance Approach
ArchOver operates a ‘Zero Tolerance’ approach. We believe this is the best way to preserve the value of our Lenders’ security and preserves the best options.
We classify ‘Borrower in Default’ as the following:
- Where a Borrower has either: missed a capital payment; missed an interest payment; failed to report monthly as required and fails to rectify the issue within 14 days. We will then act in the best interest of the Lenders to recover the situation. If we believe the situation cannot be recovered by allowing the business to continue trading, we will appoint an administrator and call a ‘Default’
- Where we believe a business is failing and we decide there is an actual (or short-term likelihood) material breach in the loan agreement by the Borrower we will appoint an administrator and call a ‘Default’ .
Unlike many Lenders, we understand that sometimes businesses get into trouble through no fault of their own and, fundamentality, there is still a solid business operating. In these scenarios, we call them ‘Special Projects’ we will work with the business to find a route out of the problem – this often involves taking temporary ownership to increase Lender security.
Where the business is failing, we will usually either run the business down or appoint an Insolvency Practitioner to review the best course of action from administration to restructuring the business, to maintain security for our Lenders.
Our Track Record
|Our Track Record||Number of Borrower(s) in Default|
Recovery and Actual Losses
When a Borrower is in ‘Default’ there are number of stages and processes we work through to carry out a ‘Recovery’ (you can learn more about our Recovery Process below). ArchOver manages the Recovery on behalf of Lenders working closely with a number of partners that excel in Administration, investigations, debt management and collection.
No charges are made by ArchOver for this work until the Lenders have received all their capital and owed interest. If there are funds left over, we charge the relevant company for our management time and costs.
We can only report ‘Losses’ once we have exhausted our collections and closed the Recovery file on the Borrower.
Cumulative Loan Book Total: The total lent by ArchOver since we launched the platform.
Amount in Recovery: Amount we started recovering in the nominated year. Note: the loan(s) in Recovery could have originated at any time in the previous four years.
Actual Losses for Year: Any Losses from the Recovery that were reported for a borrower that defaulted in that specific year. These losses figures are updated and amended if funds are recovered that were previously deemed to have been written off.
The table below details our performance under the following definitions:
|Our Performance||Cumulative Loan Book Total||Amount in Recovery||Actual Losses for Year|
Understanding more about our Recovery Process
Lending to businesses carries risk. Occasionally businesses, despite the best efforts of the management teams, fail. At the heart of ArchOver’s processes and our credit and monitoring team’s activity is the goal to strive to preserve the value and integrity of our Lender’s capital.
ArchOver’s responsibility during a loan project is to monthly monitor companies and get to know the management team. This helps us foresee if a business might be struggling and engage before it gets into real trouble. If we believe the business is struggling, we will engage on a more frequent basis and will often visit with their management to understand more.
We may appoint our partners FRP Advisory (FRP), or Begbies Traynor Group (BTG) to act as confidential advisors to us whilst working with the incumbent management to see what the options are for the business. We have a successful track record in helping business in default turn around, restructuring the businesses and ultimately improving Lender security – we believe this proactive approach sets us apart from many competitor platforms.
Only after we have exhausted these options will we look to appoint Administrators to protect our Lender’s security. The process of Administration is a well-defined path that looks at removing decision making from the incumbent management whilst the future for the company is explored. Options will include ceasing to trade and closing down, restructuring, refinancing or a possible full or part sale to an interested party or parties. Once the options have been removed we will work with the Administrator to pursue the best strategy to maximise recoveries for Lenders.
Other partners will now come into play: Escalate, our no win, no fee partners will act on cases providing a recovery service all the way through to the High Court. In addition, ArchOver will always appoint a senior Recovery Manager whose job it is to represent the interests of the Lenders and work with all our partners in ensuring the best possible outcome. The Recovery Manager will, via the Lender support teams, distribute regular updates so Lenders have visibility of progress.
ArchOver will only collect costs for our work once Lenders have received all their capital and owed interest.
We respond differently to mainstream Lenders
We understand that, sometimes, our Borrowers will face challenges that aren’t of their own making. When that happens, and if we believe it’s in the best interests of both our Lenders and our Borrowers to help the company in question get back on its feet, then we’ll respond differently to mainstream Lenders.
All peer-to-peer platforms must have ‘wind-down’ plans in place if the business cannot continue/fails.
ArchOver is part of the Hampden Group of companies. Hampden operates in the highly regulated Lloyds insurance market as well as owning Hampden Private bank and numerous other financial services firms, including expertise in run-off/wind down services.
We believe it is in the best of interest of our Lenders and Borrowers that Hampden Group is contractually bound not only to provide ‘wind-down’ services but must also ensure ArchOver remains operational and FCA regulated through the term of any ‘wind down’ and ‘run off’ of the loan book.