From 26th November 2015 we will be updating our published risk performance numbers to reflect a change in our definitions. This change has a very modest impact on the reported numbers. Loans continue to perform well below expected defaults, and the change has no impact on safeguard policies.
Definition of default to include loans in arrangements
We are changing our reporting methodology of defaults to include loans in arrangements that are past 120 days due.
“Arrangements” are agreements with borrowers to temporarily suspend the loan, and are used, by Zopa and the broader lending industry, for borrowers that have temporary issues paying their loans, for example when a borrower loses a job, but has a reasonable expectation of getting back into employment.
While these loans are not considered by the credit bureaux as defaulted, once they become more than 120 days past due, we will show these loans in our published data for defaults. As loans come out of arrangements and pay back, they will be taken out of our reported defaulted numbers. Therefore you can expect to see actual defaults plus arrangements for newer vintages to be higher than just showing technically defaulted numbers, but over time for older vintages the numbers will reduce as the arrangements pay back.
Safeguard has and will continue to operate based on the number of days past due, regardless of whether loans are in arrangements or not.
Website to report on “retail” loans
The numbers we report on our website currently show the entire Zopa loan book, which includes the D and E markets that are currently being tested with institutional partners, and are not at this time available to retail, or individual lenders. We will be updating the website to report on the relevant loans that are available to individual lenders only. The full Zopa loan book will continue to be publicly available.
Expected coverage in Safeguard has increased as estimated requirements reduce. As part of this review we have also updated our forecasting methodology for current loans, with the result that the buffer in Safeguard has increased from 1.18x to 1.20x. This is because our estimate of the required amount to be paid out has reduced.
New reporting of Safeguard
We have agreed with the P2PFA to start reporting on fund usage, which shows the amount of money paid out from the fund as a proportion of the money collected.