In the unlikely event that Zopa goes out of business, we have made a number of arrangements to take care of lenders’ funds:
- Any existing loan agreements you have are made directly between yourself and your borrowers. Zopa does not form part of these contracts, so they remain legally binding and your borrowers will continue to make repayments to you under the terms of your loan agreements with them.
- Your holding account forms part of a segregated bank account at Royal Bank of Scotland to which neither Zopa nor its creditors have any claim. Any funds you have in this account are safe.
- Also in a segregated account to which neither Zopa nor its creditors have any claim, Zopa has deposited funds to cover the cost to lenders of any future collections activity by our credit collections agency. The value of this fund is reviewed monthly and is directly correlated to the total loan repayments outstanding, including those that are not currently in any default status. We have a contractual agreement with this collections agency in which they have agreed to manage any collections activity required in return for these allocated cash reserves. The cost to lenders of collections activity will therefore not vary should Zopa fail.
- We believe that the lender fee would generate enough funds to run the system to manage repayments. The funds allocated to the collections agency are in addition to this to provide for collections of late repayments.
[edit as slight grammar correction highlighted]
Zopa's reply is fine as far as it goes. But what would happen if:
# Zopa financial failure led to its IT system being unable to operate? How would Zopa generate the information we lenders would need to pursue our individual borrowers? Is there a plan at Zopa on how it would do this? Why would an administrator appointed to protect Zopa's creditors want to look after the interests of lenders?
# Zopa's IT contingency plans failed? As lenders, our financial risks re our lenders are diversified; but not our risks re Zopa itself. What cover or assurance do we have, for example, against an insider corrupting Zopa's data? Or Zopa's standard contract with us or with borrowers turning out to be defective in an unexpected way?
IMHO Lenders depend on the integrity and reliability of Zopa, and the scale of Zopa's operations merits more transparency about how it upholds the standards expected.