Performance of recovery process – February 2017

KEY TAKEAWAYS

  • Throughout 2015 and 2016 Spain, Finland and Estonia have all experienced periods of improved recovery. Along with improvements, all three countries saw an average decrease of three percentage points in Q1 and Q2 of 2015 compared to last month.
  • Finland, Spain and Slovakia have each made strong improvements in their 2016 average recovery performance relative to their total combined average for 2014 and 2015. For example, Slovakia’s 2014 & 2015 average recovery performance was 24% whereas 2016 currently stands at an average of 123%.
  • We still have more work to do with recovery rates as some countries experienced a slight dip in 2016.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Though recoveries have dipped, the February averages reaching back to Q4 of 2015 are relatively stable with those of January for the same period. For example, Estonia, Finland and Spain’s February Q4, 2015 to Q3, 2016 averages are all within 1 percentage point of the averages for the same period in January. 2016 has seen five periods of recovery improvement while 2015 saw only two periods of recovery improvement (Spain in Q3, 2015 and Estonia in Q4 in 2015). The data in the table below is as of 14.02.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3
Estonia 53% 70% 74% 78% 107% 77% 49% 52% 57% 71% 73%
Finland 42% 65% 34% 56% 71% 66% 17% 19% 30% 53% 83%
Spain N/A 19% 16% 20% 32% 26% 34% 36% 34% 85% 39%
Slovakia N/A N/A 5% 10% 29% 14% 56% 63% 78% 251% 39%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process – January 2017

KEY TAKEAWAYS

  • Estonia’s loan recoveries have slightly dipped during the past month for period before 2016 but still showing an overall upward trend in 2016. The past years average, from Q4 of 2015 to Q3 of 2016, Estonian loan recovery is still hovering near 64%.
  • Finlands loan recoveries saw slight increases for Q3 and Q4 of 2014, but the past years average has decreased 5 basis, from 52% to 47%, compared to a month ago.
  • The average recoveries for Spanish and Slovakian loans continued to decrease for the period of 2015 and forward, with recoveries of 42% and 84% respectively. Still past years averages are showing better performances with 50% for Spanish and 122% for Slovakian loans.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Despite the slight decreases in the past couple of months, the overall recovery levels have been quite stable for Estonia’s and Finlands loan recoveries. Spanish and Slovakian loan recoveries are also showing improved numbers across 2016, which aligns with our increased efforts in improving and optimizing the collection process for the past year. The data in the table below is as of 10.01.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3
Estonia 54% 71% 74% 79% 110% 79% 49% 51% 59% 66% 78%
Finland 41% 56% 34% 57% 72% 69% 18% 20% 32% 60% 77%
Spain N/A 18% 15% 20% 33% 27% 33% 39% 30% 94% 37%
Slovakia N/A N/A 5% 10% 29% 14% 56% 68% 81% 292% 47%

You can find additional related information about the recovery process from these articles:

 

See how much investors have earned with our Refer-A-Friend program

A few months ago we announced our Refer-A-Friend program. This simple system lets you earn money for simply telling friends about the value of Bondora. The program is available to all our investors. Anyone who joins with your custom referral link and becomes an investor on our site, gets 5 EUR added to their account for their first investment. When you refer them, you get 5% of everything they have invested over the first 30 days. You get paid inside 20 business days after their first 30 days on the site. As long as your friend invests at least 10 EUR and follows our terms and conditions that all investors have to follow, the money is yours.

Average investor earned 168€ of extra income in three months

For the first time since launching the program we’re proud to share the results of those who have supplemented their earnings with referral bonus cash.

Starting from late September, 137 investors have been participating in the personal referral program. These 137 investors have invited additional 240 investors to Bondora, which makes 1,75 new investors per referrer.

Refer-A-Friend program user statistics

The average earned bonus was €168 and our highest earned bonus by referring investor to date is €1,534. Bondora has paid out a total bonus of €23,063 to our users. To date the total investment balance of our referrals has reached €461,263.

Refer-A-Friend program earnings

Join and earn more

More than 130 of our users have discovered how easy it is to send a quick message to a friend. When you invite someone to seek higher investment returns with Bondora, you’re sharing the value of your experience while earning easy income.

The more people you refer the more you earn!

Join the Refer-A-Friend program

Performance of recovery process – December 2016

KEY TAKEAWAYS

  • Estonia’s loan recoveries improved showing the strongest performance (75%) since Q3 of 2015.
  • This also outpaces the past year average of 64% ranging from Q4 of 2015 to Q3 of 2016.
  • Finland also experienced a dramatic increase in recoveries. The 90% is well above every quarter since Q1 of 2014. This represents an increase of 38 basis points over the past year average of 52%.
  • Spain and Slovakia each decreased compared to Q2 of 2016 with. The recoveries in those countries were 46% and 59% respectively.
  • The average recovery among all four countries is just over 2/3 of the value of the principal.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Estonia and Finland have both managed to sustain an uptrend for the previous five quarters. Since Q3 of 2015 both countries have made measurable improvements in recovery performance. Spain has also illustrated a similar trend until this latest data. We’re hopeful this is a momentary lapse. Slovakia has been less predictable, however the country has the highest past year average recovery figure which is encouraging. The data in the table below is as of 11.12.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3
Estonia 54% 72% 75% 80% 114% 83% 50% 52% 62% 66% 75%
Finland 41% 57% 33% 56% 74% 72% 20% 21% 342 64% 90%
Spain N/A 19% 13% 19% 34% 28% 34% 42% 30% 101% 46%
Slovakia N/A N/A 5% 10% 30% 15% 57% 77% 83% 347% 59%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process – November 2016

Let’s have a look at the monthly results for loan recoveries at Bondora.

KEY TAKEAWAYS

  • Estonia experienced a small increase in recoveries reaching 69% compared to 67% last month. This marks a continued upward trend which started in Q3 of 2015.
  • Finland saw a modest decline in recoveries hitting 72% compared to 83% seen last month. However, the performance for the month is the second highest for the country in the last three consecutive quarters.
  • Many of the figures say more about the strength of recoveries in September rather than weakness in October. Spain also dipped with 118% compared to 133%. Slovakia, while still very strong reached 429% compared to 548% last month.
  • All countries showed a significant increase in recoveries compared to the previous quarter totals for 2016.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Recoveries in each country for the month represent, at minimum, 2/3 value of the principal. Investors in Spain and Slovakia have experienced greater than 100% principal recovery for two consecutive months. Our increasingly robust litigation efforts in Spain are showing results as the 118% recovery is a dramatic improvement over just 30% for the same quarter in 2015. The data in the table below is as of 08.11.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
Estonia 55% 72% 76% 80% 116% 84% 48% 50% 63% 69%
Finland 37% 58% 32% 56% 74% 75% 21% 23% 34% 72%
Spain N/A 19% 13% 19% 35% 30% 35% 42% 31% 118%
Slovakia N/A N/A 5% 11% 31% 16% 59% 85% 88% 429%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process in Bondora – October 2016

The monthly results are in for October for recoveries on our platform. Let’s see how we did.

KEY TAKEAWAYS

  • After the significant increase of the recovery rates in September, Estonia’s principal recovery declined slightly from 71% to 67% in Q2 of 2016.
  • Slovakia’s principal recovery improved drastically from only 23% up to 548% in second quarter of 2016 due to increased recoveries in June.
  • Finland’s principal recovery for Q2 was down slightly from 102% to 83% in Q2.
  • Spain saw an improvement in recoveries from 79% up to 133% for the month, averaging around 80% across two quarters of 2016.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Our principal recovery efforts in Estonia and Finland, our two largest markets, are showing just a slight decline yet both are seeing a more than ⅔ of principal recovered. Spain & Slovakia are in with a big improvements with Spain showing a more than 100% principal recovery for the month. The programs we have in each country to help with recoveries seem to be working well for our investors. The data in the table below is as of 10.10.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
Estonia 55% 73% 76% 78% 117% 85% 47% 51% 58% 67%
Finland 37% 59% 32% 56% 74% 78% 22% 24% 35% 83%
Spain N/A 19% 13% 19% 36% 30% 33% 43% 31% 133%
Slovakia N/A N/A 5% 11% 32% 16% 60% 95% 88% 548%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process in Bondora – September 2016

Recovery Rates have been consistent across the board.

KEY TAKEAWAYS

  • Recovery rates in Estonia averaged 36% last month. For the last 3 quarters, Q4 of 2015 and the first 2 quarters of 2016, we are seeing an increase in recovery rates on a monthly and quarterly basis. Quarterly recoveries increase from 53% to 60% to 71%.
  • Recovery rates in Finland average 102% versus 108% last month. Here we have a slight decline from the previous month. The last 3 quarters we have seen declining monthly recoveries although our recovery process is improving. The last 3 quarters saw recoveries of 26%, 34%, and 102% respectively.
  • Recovery rates in Spain average 79% versus 95% last month, a slight decline. Like Finland, we are seeing a slight decline in recoveries over the last 3 quarters. The last 3 quarters in Spain saw recoveries of 43%, 34%, and 79% respectively. We just started using the legal process and litigating for recoveries here. We will be updating with how this process goes.
  • Recovery rates in Slovakia for the loans still outstanding there are improving. Monthly we have an increase from 1% up to 23%. Quarterly recoveries are at 110%, 96% and 23% respectively.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Below you can see the recovery rates across markets per quarterly cohorts. The cohorts are made of loans that defaulted in that particular quarter. The data in the table is as of 12.09.2016.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
Estonia 56% 75% 78% 80% 122% 91% 45% 53% 60% 71%
Finland 38% 52% 32% 56% 74% 82% 24% 26% 34% 102%
Spain N/A 19% 13% 19% 34% 28% 34% 43% 34% 79%
Slovakia N/A N/A 5% 11% 32% 17% 61% 110% 96% 23%

You can find additional related information about the recovery process from these articles:

 

Performance of recovery process in Bondora – August 2016

Once again we bring you the monthly update on the performance of Bondora’s recovery process across four countries – Estonia, Finland, Spain and Slovakia.

KEY TAKEAWAYS

  • Recovery rate in Estonia has averaged around 50 per cent while slowly but steadily rising under the current process. Legal litigation has recently been combined into the process to further boost recoveries.
  • Recovery rate in Finland averages around 30 per cent and similarly to Estonia has been relative stable. Recent changes to recovery process have had a positive effect for the recovery rate. Legal litigation has replaced the debt collection process starting from August. All the debt cases under the old recovery process should be filed by September 2016. All the new cases are now filed automatically.
  • Recovery rate in Spain has remained at around 45 per cent during the current process and is close to the performance in Estonia. Similarly to Finland, the recovery rate has seen a increase in the last quarters. Legal litigation will also be used in the future in a combined process to deliver highest possible recoveries. First cases will be filed in September.
  • Recovery rate in Slovakia has remained high during the past year, averaging around 90 per cent. Slovakian operations were closed in first days of 2015. Since then the remaining portfolio has continued to be serviced. The 246 loans in default have been all been processed by one debt collection agency which started in the end of 2015. This month a second debt collection agency took over the portfolio that was not activated. The recovery team anticipates that legal litigation will be started for all cases that remain in the portfolio in Q4 2016. The priority today is to clear up the backlogs in Finland and Spain.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Below you can see the recovery rates across markets per quarterly cohorts. The cohorts are made of loans that defaulted in that particular quarter.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
Estonia 55% 74% 77% 79% 121% 92% 44% 52% 57% 57%
Finland 37% 52% 32% 56% 76% 84% 25% 27% 35% 108%
Spain N/A 19% 13% 20% 35% 29% 36% 46% 39% 95%
Slovakia N/A N/A 5% 11% 33% 18% 62% 121% 92% 1%

HOW ARE RECOVERY RATES MEASURED?

We calculate the recovery rate by comparing actual principal cash flow (net of write-offs) that occurred after the default with principal cash flow that we would have expected from the loan in case it had paid according to the agreed schedule. This measure allows us to determine the expected capital loss on loans that default.

Data is aggregated to larger cohorts and recent data are excluded as otherwise outliers will skew the results too much (e.g. 1 customer repaying the full amount after default at once). On the Bondora level this means excluding the last three months of defaults and using country based quarterly cohorts. Data on individual portfolios should likely be viewed on a higher level either using yearly country based cohorts or simply quarterly cohorts across all countries.

HOW TO FIND RECOVERY RATES USING BONDORA STATISTICS?

You can easily find information on recovery rates on the entire Bondora portfolio through the Recovery Rate chart on Public Statistics. The same chart is also available for the portfolio of each individual investor in your Personal Statistics page. Simply adjust the period, country, planned, actual and group by filters to pull out the numbers shown above.

Recovery Rate Chart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Some tips to help you master the Recovery rate chart:

  • The period filter looks for loans that defaulted in the specific time range.
  • The country filter allows to look at defaults from a specific country
  • The status filter segments the data based on the loans current status (Defaulted = loan is still in default; Full recovered = the loan has been repaid in full; Restructured = a new payment schedule has been agreed; Sold = loans you have sold – this is only applicable to your private portfolio)
  • The recovery status filter allows you to analyze the performance based on the latest high-level collection and recovery stage assigned to the loan
  • Planned and actual filters make it possible to determine how the recovery rate is calculated. You can for example compare planned interest vs. actual interest received or planned principal vs. actual principal received.

HOW CAN I USE THE RECOVERY RATE?

The recovery rate helps you understand how much of the principal balance of loans in default you are likely going to receive. This figure can be used to adjust future cash flows and arrive at a risk-adjusted yield-to-maturity of your Bondora portfolio. You can do this for your portfolio through the Cash Flow page Settings section. The Forecast settings provide you recommended ratios calculated on your portfolio historic cash flow that can be used instead of taking them from recovery rate charts.

 

Setting Section

 

cash flow settings

 

 

 

 

 

 

 

 

 

 

 

 

WHY DON’T YOU CALCULATE THE RECOVERY RATE ON THE PRINCIPAL BALANCE?

Some customers have criticized the recovery rate calculation stating that a borrower who defaults is liable to return the principal balance at once. This criticism is valid from a legal perspective but not from a financial. The right to demand immediate payment of the principal balance is stipulated in the agreements to make enforcing the contract economic. The cost of collection and recovery would be excessive if enforcement steps would need to be taken for each missed payment. This clause makes it possible to substantially reduce the number of steps necessary to enforce the contract and get the borrower to start making payments under the agreed schedule.

The right to demand immediate payment of the principal balance does not mean it is reasonable to expect this to happen. Consumers take out loans to pay for larger purchases in affordable monthly payments. Loans would not be required nor interest paid on them if people would have the capital available themselves. Borrowers having financial difficulties are even less likely to have this sort of capital available. Therefore the main objective of collection and recovery is to restore the cash flow, or part of it. The success of these activities are measured by looking how much of the cash flow was restored.

Performance of recovery process in Bondora

Last week we walked through our servicing, collection and recovery process. Today we will demonstrate the performance of the recovery process across different countries.

KEY TAKEAWAYS

  • Recovery rate in Estonia has averaged around 50 per cent under the current process. Legal litigation has recently been combined into the process to further boost recoveries.
  • Recovery rate in Finland averages around 30 per cent and similarly to Estonia has been relative stable. Legal litigation will replace the current process in August as the recovery rates were higher under the old process.
  • Recovery rate in Spain has remained at around 45 per cent during the current process and is close to the performance in Estonia. Legal litigation will also be used in the future in a combined process to deliver highest possible recoveries.

PRINCIPAL RECOVERY RATES ACROSS MARKETS

Below you can see the recovery rates across markets per quarterly cohorts. The cohorts are made of loans that defaulted in that particular quarter. Debt collection agencies have been used since 2015 Q3.

Quarter 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1
Estonia 56% 76% 79% 81% 125% 96% 45% 55% 54%
Finland 39% 53% 32% 56% 77% 87% 26% 28% 39%
Spain N/A 19% 13% 19% 35% 31% 38% 51% 45%

ESTONIA:

  • Recovery rate in Estonia has averaged around 50 per cent under the current process.
  • The recovery rate was approximately 20 percentage points higher when legal arbitration was used. This practice was stopped due to regulatory changes effective from July 2015.
  • Legal cases are now being filed against loans that have gone through debt collection agents. Old cases are expected to be filed by end of the summer and thereafter it will be an on-going process. Therefore we expect the performance of the combined process to further increase recovery rates in the future.

FINLAND:

  • Recovery rate in Finland averages around 30 per cent and similarly to Estonia has been relative stable.
  • The recovery rate varied between 30 and 90 per cent when local courts were used.
  • Legal litigation in Finland will be started automatically when loan defaults as we have now developed an API to process the legal cases. The technology will be rolled out over the next month and thereafter all old cases will be filed and new cases will be filed automatically. Debt collection agencies will not be used post default.

SPAIN:

  • Recovery rate in Spain has remained at around 45 per cent during the current process and is close to the performance in Estonia.
  • The recovery rates were on average twice lower when using European Payment Order legal process.
  • Local legal litigation will be started in Spain for cases that have gone through debt collection agents. We expect to file the cases during August and thereafter set up a recurring process. The combined process, according to local market data, is expected to be close to levels achievable in Estonia and Finland.

HOW ARE RECOVERY RATES MEASURED?

We calculate the recovery rate by comparing actual principal cash flow (net of write-offs) that occurred after the default with principal cash flow that we would have expected from the loan in case it had paid according to the agreed schedule. This measure allows us to determine the expected capital loss on loans that default.

Data is aggregated to larger cohorts and recent data are excluded as otherwise outliers will skew the results too much (e.g. 1 customer repaying the full amount after default at once). On the Bondora level this means excluding the last three months of defaults and using country based quarterly cohorts. Data on individual portfolios should likely be viewed on a higher level either using yearly country based cohorts or simply quarterly cohorts across all countries.

HOW TO FIND RECOVERY RATES USING BONDORA STATISTICS?

You can easily find information on recovery rates on the entire Bondora portfolio through the Recovery Rate chart on Public Statistics. The same chart is also available for the portfolio of each individual investor in your Personal Statistics page. Simply adjust the period, country, planned, actual and group by filters to pull out the numbers shown above.

Recovery Rate Chart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Some tips to help you master the Recovery rate chart:

  • The period filter looks for loans that defaulted in the specific time range.
  • The country filter allows to look at defaults from a specific country
  • The status filter segments the data based on the loans current status (Defaulted = loan is still in default; Full recovered = the loan has been repaid in full; Restructured = a new payment schedule has been agreed; Sold = loans you have sold – this is only applicable to your private portfolio)
  • The recovery status filter allows you to analyze the performance based on the latest high-level collection and recovery stage assigned to the loan
  • Planned and actual filters make it possible to determine how the recovery rate is calculated. You can for example compare planned interest vs. actual interest received or planned principal vs. actual principal received.

HOW CAN I USE THE RECOVERY RATE?

The recovery rate helps you understand how much of the principal balance of loans in default you are likely going to receive. This figure can be used to adjust future cash flows and arrive at a risk-adjusted yield-to-maturity of your Bondora portfolio. You can do this for your portfolio through the Cash Flow page Settings section. The Forecast settings provide you recommended ratios calculated on your portfolio historic cash flow that can be used instead of taking them from recovery rate charts.

 

Setting Section

 

cash flow settings

 

 

 

 

 

 

 

 

 

 

 

 

WHY DON’T YOU CALCULATE THE RECOVERY RATE ON THE PRINCIPAL BALANCE?

Some customers have criticized the recovery rate calculation stating that a borrower who defaults is liable to return the principal balance at once. This criticism is valid from a legal perspective but not from a financial. The right to demand immediate payment of the principal balance is stipulated in the agreements to make enforcing the contract economic. The cost of collection and recovery would be excessive if enforcement steps would need to be taken for each missed payment. This clause makes it possible to substantially reduce the number of steps necessary to enforce the contract and get the borrower to start making payments under the agreed schedule.

The right to demand immediate payment of the principal balance does not mean it is reasonable to expect this to happen. Consumers take out loans to pay for larger purchases in affordable monthly payments. Loans would not be required nor interest paid on them if people would have the capital available themselves. Borrowers having financial difficulties are even less likely to have this sort of capital available. Therefore the main objective of collection and recovery is to restore the cash flow, or part of it. The success of these activities are measured by looking how much of the cash flow was restored.

About Bondora’s servicing, collection and recovery process

Our investors have continuously been interested in the topic of Bondora’s collection and recovery. So as a continuation of yesterday’s post we decided to give you more details about our current setup of servicing, collection and recovery and also what to expect in the near future.

HOW HAS SERVICING, COLLECTION AND RECOVERY PROCESS DEVELOPED IN RECENT MONTHS?

In March we informed you about substantial changes to our collection and recovery process. Since then our loan servicing, collections and recovery department has been continuously fine-tuning the process. Today we would like to go through the improvements made since March as well as changes that we’ll be introducing in the near-term. We would also like to take a step back and explain the full process again in depth.

KEY IMPROVEMENTS TO THE SERVICING, COLLECTION AND RECOVERY PROCESS

  • Mandatory repayments over SEPA Direct Debit were rolled out in Finland and Spain in May. Process was later stopped in Finland as the SEPA Direct Debit had low coverage but in Spain it is working well.
  • Only the best performing debt collection agencies were kept in each country.
  • Legal cases are being filed against loans that had gone through the collection stage in Estonia. Old cases are expected to be filed by end of the summer and thereafter it will be an on-going process.

UPCOMING MAJOR DEVELOPMENTS

  • Experian credit bureau will also be implemented in Spain, similarly to Estonia, to notify debtors on our behalf. In Estonia this notification has a strong impact to the pre-default collection rate.
  • Legal litigation in Finland will be started automatically when loan defaults as we have now developed an API to process the legal cases. The technology will be rolled out over the next month and thereafter all old cases will be filed and new cases will be filed automatically.
  • Legal litigation will also be started in Spain for cases that have gone through collection. We expect to file the cases during August and thereafter set up a recurring process.
  • Different alternatives to file cases against Slovak delinquent portfolio are being explored. We will aim to process the entire portfolio by end of Q3.

HOW ARE LOANS SERVICED BY BONDORA?

Bondora AS (Bondora) provides (or procure the provision of) servicing, loan administration, collection and recovery services in respect of the loans originated by Bondora and later sold through the Bondora.com marketplace platform (managed by Bondora Capital OÜ). The servicing is made through a bank account in the name of Bondora, but segregated from its assets, that will receive SEPA Credit and Direct Debit Transfer payments from borrowers as well as payments from third party payment gateways.

Bondora has established a bank account in its own name but for the benefit of the investors (and Bondora Capital) and directs borrowers to pay interest and principal repayments into that account. The funds on the dedicated account are not be co-mingled with Bondora’s assets.

Investors get daily, loan-level performance and payment information in respect of the loans they own via Bondora.com.

WHAT HAPPENS IF LOAN REPAYMENTS ARE NOT MADE ON TIME?

Bondora´s collection strategy focuses on efficiency, time, quality and customer satisfaction. Bondora´s philosophy is to strive for successful debt collection by being responsive to its borrowers’ changing financial circumstances yet having largely automated standard operating procedures. The ultimate goal is to restore as large percentage of the planned cash flow as possible whilst maintaining a strong reputation. This strategy has resulted in relatively high recoveries on defaulted loans.

Year of default Scheduled principal payments post date of default till date Actual principal received post date of default till date Percent of cash flow restored
2014 1,492,300 EUR 703,810 EUR 47%
2015 1,630,353 EUR 943,390 EUR 58%
2016 63,302 EUR 26,006 EUR 41%

Payments are handled via either SEPA Credit Transfer, SEPA Direct Debit Transfer or online payment gateways. The standard servicing process is continued until the outstanding balance is recovered, the amount awarded by a court repaid or the amount agreed in settlement repaid. Any claim reductions (gaps between claim balances calculated by our system and the amount the customer is supposed to pay under a settlement or court order) are shown as write-offs in your account reports. It is unlikely that a loan will be discharged in a legal process, as personal bankruptcy typically does not allow debtors to walk away from their loans, including unsecured consumer loans.

Stage Days from/to payment Process
 Cuurent account -7 Email and text message with upcoming payment details or a SEPA direct debit payment call.
-1 Email with upcoming payment details.
0 Borrower makes a SEPA payment from their bank account to Bondora´s bank account or SEPA direct debit payment arrives. The payment is matched to their account either using a unique reference number the borrower added or the borrower´s IBAN account number.
Delinquent account +1 to +7 Daily email, text message, postal letter and automated calls requesting borrower to take immediate action to repay the debt or to contact us in order to find a solution.
+8 Case handed over to debt collection agents (external, in-house or both in parallel) for collections.
+60 Debt collection agents hand the case back in case they have not been successful in restoring payments.
Email notifying the borrower of charge-off and start of legal action if the borrower shall not pay within 2 weeks from the date of notification.
Account default +74 Account is considered in default after it has been overdue for more than 74 days and the amount overdue is larger than two monthly payments. Email notifying the borrower of start of legal action.
Borrower details will be published with the local credit bureau.
+75 FINLAND: legal litigation will be started in the local court. The process takes typically 4 months until a verdict is made.
SPAIN and ESTONIA: Case handed back to a local debt collection agency. Debt collection agencies are used in Spain and Estonia first as local courts are considerably less reliable and higher cost than in Finland.
+75 to +165 Debt collection agency attempts to collect the debt and agree on a new payment schedule with the debtor. The monthly payment in the schedule needs to be at least equal to the monthly payment of the original schedule.
+166 to +200 FINLAND: The case is handed over to a local bailiff after a court makes a decision. The speed of recovery will thereafter depend on the income/assets of the debtor and their other debts. Bailiffs have rights to freeze debtor’s assets and accounts and deduct payments from debtor’s bank accounts to cover their debt.
Assets can be liquidated, regardless if they were set up as collateral or not, as part of a bankruptcy process.
SPAIN and ESTONIA: In case the DCA is unsuccessful, but potential recovery through a court procedure is high (e.g. customer does not have many debts and has assets) then a court case will be filed with the local court. Court process takes between 4-12 months depending on the local court and debt amount. The case is handed over to a local bailiff after a court makes a decision. The speed of recovery will thereafter depend on the income/assets of the debtor and their other debts. Alternatively in case the success of a court process is low the claim is passed from one DCA to another until payments are recovered.

WHAT ARE THE COLLECTION AND RECOVERY COSTS?

Collection and recovery costs are not paid separately, but deducted from the gross cash flow recovered in connection with the servicing of the delinquent portfolio. Currently this cost on average is 15% of cash flow received in respect of delinquent loans but it may change in the future. There are no costs charged if no payments are collected. These costs are shown as write-offs in your account reports.

The collection and recovery costs are deducted from the cash flow received in respect of delinquent loans. The remaining amount is transferred to the investors within one business day of the date of receipt of the relevant amount of cash flow generated by the delinquent loans, including payments on account of principal, payments on account of interest, and all other proceeds of any other legal or insolvency proceeding or recovery. The transfer may take longer if cash is received without proper documentation or references.

WHEN AND HOW ARE EXISTING LOAN AGREEMENTS MODIFIED?

All borrowers have the statutory right to:

  • withdraw from the loan agreement within 14 days from the loan issue date;
  • repay the loan early; or
  • repay part of the loan early.

The borrower is required to pay interest for the time the principal was outstanding, regardless if they repay the loan early or withdraw from it. In case they withdraw from the loan agreement, the contract fee paid to Bondora will be refunded.

Borrowers using B Secure are able to adjust their repayment schedules to:

  • take up a principal payment holiday;
  • make the length of the loan schedule shorter or longer; or
  • change the monthly payment date.

The borrower has to have made at least 1 full monthly payment according to their active schedule before being able to modify it again. In case the borrower has unpaid fees, interests or other debts at the time of making changes to the repayment schedule (either changing the monthly payment, taking the payment holiday or changing length of your repayment schedule), they must pay all overdue amounts with the first payment of the new, modified repayment schedule.

Loan modifications are all borrower-initiated and executed through their self-service portal. Loan modifications are allowed in order to be able to adapt to borrowers changing financial circumstances as well as to avoid defaults. In case a borrower defaults then local courts or bailiffs can enforce loan modifications that are considerably less lender-friendly than modifications agreed with the borrowers directly.

HOW ARE BANKRUPTCY PROCEEDINGS STARTED?

Bankruptcy process is only initiated if bailiff has not been able to collect the debt after freezing the borrower’s assets and accounts whilst the borrower still has marketable assets. Bondora will either initiate the bankruptcy process on its own or join an existing bankruptcy filing. Borrowers may also file to start bankruptcy proceedings.

Bondora has had only a limited number of bankruptcy cases over the duration of 5 years. Personal bankruptcy is not common in continental Europe as discharging debt will take up to 7 years depending on the country. Therefore, borrowers with marketable assets and recovery potential typically repay debt under a new payment plan rather than opt for a bankruptcy process. Bankruptcy process would not yield any additional benefits against borrowers without marketable assets.

HOW QUICKLY ARE PAYMENTS PROCESSED?

Bondora banks with Swedish SEB’s Estonian subsidiary SEB Pank AS. Bondora has an automated payment gateway with SEB Pank AS to receive credit payment details and issue debit payment instructions. Bondora processes incoming payments automatically if the payment has a reference number or is coming from an IBAN account registered on the borrower’s account. A small number of payments are reconciled once a day manually if there was no reference number and the payment arrived from an unknown IBAN account.

Every SEPA credit transfer customer delivers to their bank before the cut-off time of 14.30 hrs. CET is guaranteed to be processed within one business day.

SEPA credit transfers delivered before 15.00 hrs. CET will be processed on a best efforts basis. These payments will be debited from borrower’s account the same day, but sometimes they cannot be sent to Bondora’s bank the same day. If so, they will be sent on the next business day.

Bondora uses authorized payment service providers to process its SEPA Direct Debit mandates. Debiting the borrower will take 5 business days and the payment order must be created 3 days before that (6 days in case of first collection with SEPA CORE).

WHAT DOES IT ALL MEAN FOR ME?

Loan servicing, collection and recovery is an on-going process that develops in time. There are continuous tests being made to identify the most effective and efficient process for each customer segment and country. Changes in legislation and technology often create new boundaries whilst also opening up new opportunities. Bondora will aim to continue improving its processes to adapt with the changing environment as well as investor demand.