Coronavirus and your investment
This content was updated on 24th August to add more details on how we’re supporting borrowers and changes to our risk market categorisation.
We are living through uncertain times with things changing every day and through this we're doing everything we can to protect your investment. We'll be updating this blog to keep you posted on our activities.
How we’re supporting borrowers
With the unprecedented situation the country is facing, some borrowers have understandably run into difficulties with their loan repayments. Our goal is to make sure that those borrowers who had been managing their loans responsibly up to now do not default due to what could be short term difficulties. This would not be the right approach for your investment, or for them.
In line with FCA guidance released in May, we were offering payment freezes or reduced payment plans for an initial period up to three months for borrowers impacted by the Coronavirus. In June, the FCA announced that this approach would be extended until October. The guidance also says that customers who were already on a plan but are still struggling financially due to the Coronavirus could choose to extend their freeze or reduced payment plan for a further three months.
When customers start to near the end of their original plan or freeze, we’ll proactively get in touch with them to agree together what happens next. We’re providing a budgeting tracker tool to help customers understand exactly what they could afford going forward. These are the options that will be available to them:
- To go back to contractual repayments, making up missed payments by extending their loan term. So, if they were on a three-month freeze, their term would extend by three months.
- To reinstate their repayments with the total of missed payments built up during their plan added onto their regular monthly repayments. In this case, their loan term remains the same, but their monthly payments increase.
- To work out a reduced payment plan using our budget calculator tool. Customers on reduced payments won’t be reported as being in arrears to the credit reference agencies for up to three months – this is the longest time the FCA currently says borrowers can extend their plans for.
- To enter into a 're-start' plan which will allow them to continue to freeze payments for up to three months, but they must be sure they can 're-start' their payments after this time. During their extension, we won’t be reporting missed payments to the credit reference agencies.
- Finally, there is a choice to default on their loan immediately, if they don't feel they will be able to restart payments after an additional three months. This is a sensible option for those who may have lost their income due to the Coronavirus.
What this means for your investment
While on a payment plan or a freeze due to the disruption caused by the pandemic, the loans will not default. This provides the right support and incentive for borrowers to go back to repaying their loans on the original terms once things recover, making it less likely that you'll lose the value of the loan from your investment balance. However, this does mean there will be a pause or reduction in payments on loans while they’re on a freeze or reduced payment plan.
To give you a clearer picture of how these changes affect your investment, we recently made some updates to your loan book. You can find out more over at our loan book glossary page.
Risk market re-categorisation
We have made a change to our risk market categorisation. As we’ve communicated previously, we moved quickly to adjust our approach to new lending and tightened our risk appetite in response to the Coronavirus. This has meant that since May, investors in Zopa Core could be matched with new A*- B loans and for Zopa Plus we limited the mix to A* - C loans.
Having reviewed the last few months of data available to us, we now feel our updated risk appetite will remain in place for the foreseeable future. Therefore, we’ve decided to re-categorise how we label our risk markets so that we can return to an A* - E mix, with Zopa Core again taking in A* - C loans and Zopa Plus A* - E. It’s important to note, we’re not introducing any additional risk through this change, but simply re-labelling the type of loans that are within our tighter risk appetite. So, for example, what we had labelled as a C loan that would only have been available to Plus investors might now be categorised as an E loan for Plus investors. The image below gives an idea of how this will look in practice.
Buying existing loans from investors
You will still be able to acquire existing loans sold by other investors that would have fallen into our older C risk market categorisation if you invest in Core and D and E risk markets if you invest in Plus. The price you purchase these loans for will be adjusted to make sure they are bought at the latest market rate.
Keeping your finances safe
Unfortunately, there have been reports of scams and people trying to take advantage of this situation, so make sure you remain vigilant to keep your finances safe. Check out the FCA ‘s latest info on how they’re supporting consumers.
And of course, keep doing all the usual good stuff, like keeping your passwords safe and being on the lookout for scammers – we have a handy blog post on this.
We’ll be here to help
If you need us, we’ll be here.
We’re following government guidelines and so Zopa has moved to company-wide home working. We’ve already tested this to make sure we can all do this effectively. Our customer service team are available to help and our goal is to ensure our service isn’t disrupted.
That said, we hope you can understand our phonelines are busier than usual. If you’d rather not wait on hold, you can contact us through live chat in the Zopa app or through the Support page. If you contact us by chat, we’ll reply instantly, or email you to let you know when we have.
In our 15 years we’ve seen a lot, including the 2007/8 recession. While this is an unexpected situation for everyone, we believe we have the experience, the tech and the people to adapt quickly and make the changes we need to continue to serve our customers through this uncertain period.
We’ll keep this page updated as the situation evolves. We ask all our customers to keep following government guidance which can be found here