In the unlikely event that a loan originator goes out of business, we have put in place arrangements to ensure that investors continue to receive payments on the loans in which they have invested in through the Mintos marketplace.
On Mintos, there are two types of loans - loans with the Direct and Indirect Structure. You can select which loan types you would like to invest in using the “Investment Structure” filter on the Primary and Secondary Market.
When you invest in a loan, you are buying claim rights against the borrower based on an assignment agreement. Borrowers make payments on their loans to the respective loan originator, and in turn, the loan originator and Mintos distribute payments to investors. In the event that a loan originator fails or becomes insolvent, assignment agreements would remain in place and be unaffected.
As per the assignment agreement and cooperation agreement with Mintos, in the event of the insolvency of the loan originator, Mintos as a representative of the investor, would take over the management of the claim from the loan originator and recall authorisation of the investor to the loan originator or implement another strategy which would be to the best benefit of the investor. This means the loan originator would no longer be managing the borrowers' payments. After having taken over the management of the claim from the loan originator, Mintos would be entitled to transfer the management of the claim to any third party at Mintos’ discretion. This means that Mintos as a representative of the investor would inform the borrower of the assignment and direct continued payments to Mintos or any third party at Mintos discretion.
The transition from the loan originator servicing its payments to Mintos taking over this process may not happen immediately. The length of time for the transition depends on the legal obligations of the loan originator.
For loans under the Indirect Structure, the direct claim is against the loan originator and not the borrower and the underlying loans issued to the borrowers are pledged in the name of the respective Mintos company. If the loan originator becomes bankrupt, we have agreements in place with the loan originator and also a commercial pledge which ensures investors on Mintos will be the first to receive payments from bankruptcy assets.
In this situation, Mintos will be involved closely in the legal proceedings and all funds received from the loan originator will be divided proportionally to their investments among investors. The time it will take for investors to get the borrower’s repayments returned depends on the legal proceedings and other external factors of the loan originator.
You can find which loan structure loan originators on Mintos use here