Under the EU Crowdfunding Regulation, disclosure of loan default rates is required in a specific manner. This is required to ensure investors in Crowdfunding platforms are able to compare between platforms and investors are treated fairly.
This FAQ is designed to help you understand the key points of this regulation and how it's applied at Trine. The regulation has specific guidelines on defining and calculating default rates, and we'll explain these to you in the sections below.
What constitutes a loan default for the purposes of this disclosure?
A loan default occurs when:
Trine assesses that the borrower will not pay in full or meet credit obligations without taking actions such as realising security.
The borrower is more than 90 days late on significant credit obligations related to a loan. (Please note that this definition of ‘Default’ is different to our loan statuses which we use in regular communication and dashboards. For clarity the definition in this FAQ will only be used for the required Crowdfunding disclosure table at the bottom of this document. All other references to Default on the website will follow the definition in this linked FAQ document.)
What are the signs a borrower may not pay?
The following are indicators of a borrower unlikely to pay:
Distressed restructuring of credit obligations, resulting in material forgiveness or postponement of principal, interest, or fees.
The borrower applying for bankruptcy or similar protection to avoid or delay repayment to investors.
If a borrower alters, suspends, or delays payment schedules, is it considered default?
No, not immediately. If the contract permits such actions under specific conditions, it isn't considered a default. However, Trine will analyse the reasons for these changes and assess the likelihood of payment.
How is the default rate defined for the purpose of this disclosure?
When figuring out the one-year default rate:
a) Start by counting all the loans that haven’t failed to pay at the beginning of a year (i.e. have never defaulted).
b) Then, of those starting loans, count how many ended up defaulting at any point during that year.
Default rate is b) divided by a)
If there are any loans that don’t require payment within the year, don’t include them when calculating the rate of loans not paid back for that year.
How does Trine assign loans to risk categories?
Trine considers all loans to be the same risk category.
Default Rate Disclosure | 2020 | 2021 | 2022 |
a) Active Loans at start of the year | 53 | 54 | 58 |
b) Defaulted loans during the year | 10 | 12 | 3 |
Default rate (b / a) | 18.9% | 22.2% | 5.2% |