Legal structure: What are we changing?

We have finalized a new bankruptcy-remote legal structure that is suitable for EU and non-EU investors, both natural and legal entities (incl. non-financial legal entities). The new structure will reduce compliance and operational risks for investors on the platform. The new structure will be rolled out by end of August and a separate notification sent prior to the final roll-out.

Under the new legal structure the loan originator shall be Bondora (isePankur AS), meaning that Bondora shall conclude loan agreements with borrowers and then assign the loan claims deriving from loan agreements to the investor. The claims deriving from the loan agreements are assigned to the investor through a broker entity immediately after the loan agreements have been concluded.

According to the claim assignment agreement, Bondora will continue to service the loans in its own name as it is currently. In case of default of the customer the ownership of the claim is assigned back to Bondora as it is currently. The claim will be secured in favour of the investor until the claim has been assigned back to the investor. If Bondora receives any payment as a fulfilment of claims it forwards payments (minus fees payable to Bondora or third party collection companies) to the investor.

After the launch of new structure we do not have right to charge customer a penalty rate in case of late payment but instead the interest will accrue even after the loan goes to default. Consumer credit regulations in force across our markets allow a consumer lender to either charge a penalty (typically approx. 8% per annum) or continue to charge the original interest rate. Penalty rate will not be charged as in most cases the interest rate is higher than the maximum statutory penalty rate.

The claims are the sole property of the investors and will not form a part of Bondora’s assets in case of bankruptcy. The terms of use establish that in case of Bondora’s bankruptcy, Bondora will take reasonable steps to transfer the management and administration of the loan agreements to a back-up service provider. We currently carrying out negotiations with a number of internationally recognized companies active in all jurisdictions where we are operating. Therefore, the contemplated structure establishes that in case of Bondora bankruptcy, the servicing of claims and loan agreements will be done by a professional back-up service provider and not by the bankrupt entity. Therefore, bankruptcy of Bondora will not terminate the servicing of claims.

Other changes are related to the improvements made in our debt recovery process. We have started using collection companies since companies we have now shortlisted have been able to prove their ability to recover debt faster than through courts. Since in different countries the regulations governing consumer debt collection vary, there might be a need to deduct third party debt collection fees from recovered cash flow whilst the claim is reduced by the full amount paid by the debtor to the collection company. The LGD parameter used in risk pricing already accounts for such deductions as it uses net cash flows from defaulting customers as basis of the calculation.

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26 thoughts on “Legal structure: What are we changing?”

  1. A quick question that came up: Why aren’t you mentioned in “finantsinspektsioon” as you are a credit provider now?
    Can’t find anything about bondora/isepankur/sõbralaen.
    https://www.fi.ee/index.php?id=286

    Can you maybe explain a little more about, who is lending to whom and who is buying what?
    From queries to and answers from Estonian tax office i start to get a feeling that if you would be actual legal credit provider, “investeerimiskonto” might be a possible option to invest in bondora as individual. (You might be in the same bucket as interactive brokers or any other brokerage company in that case)