Our latest blogpost on collection process received a lot of attention. We gathered together the most hot comments and highlighted the answers in a separate post.
- Why is the success fee % so high in Estonia?
In Estonia we are testing 4 DCAs to understand if higher collection fees offered by some of them will result in higher recovery. However, all of the DCAs will be evaluated based on the net payout (amount collected less the fees).
- How will Bondora handle overdue on auxiliary claims such as borrower failed to pay the management fee? If there is a recovery coming in how will this amount be distributed between Bondora and the investors?
The recovered amount is distributed in the following order: a) principal, b) management fee, c) interest. Thus, we will collect the management fee only in case the full amount of principal is fully recovered.
- How will Bondora keep the investors updated on the progress of recovery?
Investors can use the “Recovery Statistics” report to track the performance of the DCAs. Thus, all loans passed to the DCAs will stay under Stage 1, and in case DCAs are not successful and we turn to court, the status will change to the Stage 2.
- Can you please briefly compare the new process to the previous model?
The difference to the previous process is that after 90 days of non-payment we attempt to collect using DCAs, while previously we turned to courts right away. We will involve up to two DCAs and each of them are given 90 days to collect (DCA #1: days 90 – 180, DCA #2: days 180 – 270). In case none of them collect the due amount, we turn to court.
The reasoning behind the change is that we expect higher net collection by involving DCAs before engaging in a lengthy and irreversible process of collecting through courts.
- Why the collection process cost are not paid by the borrower?
Passing the collection costs is either already prohibited or will be prohibited soon by the regulators. The regulator in this case sides with borrowers to protect them from aggressive practices used by some lenders.
- Will you guarantee that all principal will be paid back (if the DCA collects enough) and there are no fees until all principal is paid back?
The agency is paid a success fee based on the collected amount, and all net proceeds (collected amount less the agency fee) are first used to repay the principal until either a) the principal is repaid in full or b) the borrower settled the claim.
- Is Bondora going to adjust its management fees downward to account for reduction in its costs?
We have considerably lowered our management fee recently (August) to make Bondora loans more affordable to the borrowers. At the same time we have kept the interest rates to Investors intact.
- Are there any loan recovery statistics?
You can see the “Recovery Statistics” report for your portfolio under “My Investments” -> “Statistics”, or you can use the Loan Dataset if you want to get a more detailed overview.