Toxic loans blight aristocrat’s £153m savings company
MOre than half of the customers of an internet loan firm run by an aristocratic financier are behind on their payments or in default, the Mail can reveal.
Wellesley, a peer-to-peer lender which allows property developers to borrow cash from savers, is grappling with losses on its loan book.
It is known for an aggressive TV advert campaign boasting of 4pc interest rates for savers – far higher than available from traditional banks – and is backed by 52-year-old hereditary peer Graham Wellesley, the 8th earl of Cowley.
Documents seen by the Mail reveal how losses have mounted at the firm.
It comes as the Financial Conduct Authority, the City watchdog, prepares to launch a probe into the booming peer-to-peer lending industry. With these businesses, customers’ deposits are used to fund loans for firms. The risk to the saver is that the business may not fulfil its potential and be unable to repay the loan.
Last week peer-to-peer lender ratesetter was hit with £80m of struggling loans and forced to use its own funds to prevent losses being taken by 50,000 users. Around £36m of loans had been made with a motor finance company that had fallen into administration.
Now analysis of Wellesley accounts reveals ten loans worth £11.7m are described as non-performing with a loss forecast – meaning the business is not expecting to get all its money back. Another 12 – worth £35.5m – are also non-performing, but Wellesley says it expects a full recovery. A further 14, valued at £25.8m, are in arrears.
The remaining 29 loans, worth £ 79.8m, are performing as expected. however, in most of these cases repayments have not started yet – meaning borrowers cannot be in arrears because they have not yet been asked to give anything back.
Wellesley reported a £210,288 loss for 2016, down from £3.3m in the previous 18 months.
Bosses said the value of the lender’s investments rose 33pc to £206m in the first half of last year. however, there was no growth at all in the second half because they stopped advertising.
Total lending rose just 10pc in 2016 – and only 2pc in the last six months. This is a dramatic slowdown from the previous 18 months, when lending surged 907pc.
The business claimed this was because short-term loans were being repaid and replaced by new business, and that low growth was normal and expected.
earlier this year the firm struggled to raise £1.5m it needed as support from investors. Its finance head Alasdair Lenman also announced he was leaving after just eight months in the job.
As with other peer-to-peer lenders, Wellesley is not covered by the Financial Services Compensation Scheme, meaning investors could lose their money.
The firm has backing from more than 14,000 investors and claims to have provided them with average returns of 4.49pc. Wellesley said there had been a slight improvement since it published its loan book, although it was unable to share an updated version.
‘To date, our investors have received all interest and capital due,’ a spokesman said.