Loan Provider MoneyThing Closes With 44% Of Its Loans In Default
09 Dec 2019
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- MoneyThing is closing down with immediate effect as tighter regulations continue to hurt small lenders
- The loan provider closes with an outstanding debt of £20.3 million and loan defaults of £9 million
- Small lenders blame stricter regulations and economic uncertainty for closure
Loan provider MoneyThing has announced that it is winding down with immediate effect. It is a massive blow to the peer-to-peer industry, which has seen various lenders go bust in recent times. Recently payday loan lender QuickQuid closed down after another lender Wonga had gone bust last year.
Loan provider MoneyThing has 44% of its loan book in default
The loan provider has indicated that it will not be accepting any new customers or investments. MoneyThing expects to wind down all outstanding loans by the end of 2020. At the time of closure, almost half of the lending firm's loan book was in default. The Moneything platform had around £20.3 million in outstanding debt, with £9 million considered in default. It is equivalent to about 44% of the firm’s loan book. Therefore this means that customers have been struggling to repay their loans.
MoneyThing was one of the series of companies that have emerged in peer-to-peer finance. The P2P allows savers to loan directly to borrowers through an internet platform and earn money from the interest. The platform allowed people to invest in property development and business loans. MoneyThing is now blaming uncertain economic conditions and lack of investor confidence for its closure.
Economic uncertainty resulting in the closure of MoneyThing
The UK Financial Conduct Authority (FCA) has tightened lending regulations which have made it difficult for some lenders. Besides the tight regulations, the rocky economy of the UK has also made it difficult for loan providers to turn a profit. As a result, this has increased the risk of the investor getting losses if borrowers default on the loans.
MoneyThing told its customers that it had consulted its lenders, and it is clear the majority are confident about the platform. However, some of the investors expected to cut their investment across the P2P or keep their loans at lower levels. The firm indicated that as a result, it would not be able to offer new loans in current circumstances. Further, the company stated that it had become difficult to compete as the market conditions are likely to persist.
Stricter FCA lending regulations making it hard for small lenders
The FCA is planning to impose more stringent regulations on the industry from December 9. However, the lending firm has indicated that the incoming regulations did not contribute to its closure. MoneyThing is not the only P2P site that has closed as Landbay also announced the closure of its private investors' platform. Landbay also asserted that the closure was not a result of the new regulations.
MoneyThing’s Sophie Pearce stated that the smaller platforms were finding it hard to offer borrowers competitive rates. She also added that lenders' confidence had waned following the collapse of prominent firms such as FundingSecure and Lendy. She further indicated that the loan provider was not ready to accept riskier customers necessary to generate high returns.