Peer to peer lending is still a relatively underutilised borrowing and investing alternative in New Zealand. We have put together these FAQS to help you better understand the arrangement.
Should our FAQs not cover your specific query or information requirement, please contact us at firstname.lastname@example.org with your query, and we shall endeavour to respond with the information you require.
What is peer to peer lending?
Peer to peer lending is a lending arrangement that enables investors (funders) to fund borrowers via an online platform (the marketplace) without the involvement of traditional financial institutions like banks.
The entire process is quick, easy, transparent and convenient.
How is Zagga's peer to peer lending different from a bank loan?
Peer to peer lenders are not banks or finance companies and we don't lend or borrow money ourselves – we simply provide a flexible alternative for borrowers and investors to get a better deal. In other words, we match approved borrowers with committed investors ready to fund.
Unlike borrowing and investing through traditional channels, we provide a platform to match creditworthy borrowers with savvy investors. Investors have complete control over the types of loans they are prepared to fund, and can earn attractive returns. Borrowers benefit from a convenient, transparent and speedy application process, with easily understood rates.
Why is peer to peer lending now available in New Zealand?
Peer to peer lending is well established overseas and growing at phenomenal rates in the US, Europe and the UK. Marketplace lending is still relatively new in New Zealand but is already gaining momentum and popularity as it can offer borrowers a much more flexible, and sometimes more cost-effective, alternative to traditional financial intermediaries. Investors can also receive an attractive return and retain choice and control over the level of risk they are exposed to.
Peer to peer lending has been made available in New Zealand as a result of changes to the Financial Markets Conduct Act (2013).
Is peer to peer lending regulated and by whom?
Peer to peer lending is regulated and scrutinised in the same strict standards as traditional lenders. This is done by the Financial Markets Authority (FMA) who are also responsible for issuing licenses and monitoring the conduct of licensees.
Zagga is fully licensed and holds a Financial Service Provider licence (FSP 393946) to provide peer to peer lending under the Financial Markets Conduct Act (2013). Additionally, Zagga fully complies with the requirements of the Responsible Lending Code and applicable Anti-Money Laundering regulations.
What are the risks associated with investing through a peer to peer platform?
All investments carry some degree of risk, and generally higher rates of return are associated with higher risk of loss of capital invested or investment returns. Please refer to FAQs – Invest / What are the risks?
What is the difference between secured and unsecured lending?
A secured loan is secured by an asset belonging to the borrower - typically a mortgage over property - to decrease the risk assumed by the lender. Because we secure all approved loans with a registered mortgage over real property (and may, at our complete discretion, request additional security), we can lend larger amounts for a greater range of purposes, as the credit risk to a prospective investor is mitigated.
An unsecured loan does not have any assets to act as security against the loan in the event the borrower defaults on the repayments. Because of this, the interest rate charged is generally higher than a secured loan, as lenders take a greater risk. Consequently, investors may prefer to invest in unsecured loans for lower amounts.
How does the Zagga process work?
Once an investor has joined Zagga, registered and completed their investment risk profile and investment objectives, their details will be stored in the platform. The investor will be notified when there is a loan/borrower that matches their specified investment criteria. The investor will have the opportunity to view relevant loan details and decide whether to commit funds to the investment.
If the investor agrees to participate in the funding of the loan, their share of the loan, subject to a minimum investment of $1,000, will be transferred into Zagga's Trust's bank account. Once all legal documentation is signed and a mortgage taken over the security property, the funds will be made available to the borrower.
From there, Zagga manages the loan - collecting repayments from borrowers, issuing investors with their regular investment returns, and dealing with any defaults or collection issues.
All loans are written in the name of Magna Trust Company Limited as trustee, with each investor recorded as a beneficiary for their financial share of the loan and underlying security. This trust is separate from Zagga, but associated on Zagga's peer to peer lending licence, and specifically established to issue loans, hold securities and disburse funds, on behalf of the investors.
Does Zagga have any physical branches?
We have an office in Auckland and Christchurch but do not have any branches as we are primarily an online business.
How does Zagga make its money?
We charge borrowers a Platform Fee. This is between 1 - 7% of the loan amount depending on our Credit Assessment Score which is derived using the borrower's credit history, loan amount and value of the security property.
We charge investors an ongoing monthly Loan Management Fee which is between 0.9 - 1.95% of their fractional share of the annual outstanding loan balance.
Can I be a borrower and an investor?
Yes, you can! Simply join our marketplace, then complete the registration for both a borrower and investor. However, you cannot invest in a loan in which you are a borrower, guarantor or mortgagor.
Note that to be accepted as a registered investor, we must verify your identity and you must hold a New Zealand bank account. You can find out more about investing with us by contacting us on 0800 286 286. We are open 9am to 5pm Monday to Friday, except public holidays. Or, if you prefer, email us anytime.
How do I register with Zagga?
Once you’ve joined our marketplace, simply follow the links to register as either an investor or a borrower.
Please note that before you can transact, we must be able to verify your identity to comply with the AML/CTF Act. For your convenience, please refer to the AML/CTF Checklist for a list of documents that we require for this purpose.
Where do the loan repayments go?
Borrowers' loan repayments are deposited into Zagga's Trust's bank account. The loan management fee, payable by the investors, will be deducted and paid to Zagga, and the balance will be forwarded to the investors as their return.
Do borrowers know who is funding their loan?
No, the names and details of investors will not be disclosed to borrowers.
Do investors know to whom they are providing funding?
We only share relevant loan information to registered investors to whom we have matched a loan. The borrowers' names are only provided to investors with the borrower's prior consent. The borrowers' personal details such as residential address, telephone numbers, email address and place of work, are never released to investors.
Contact details or any information that can identify borrowers or investors must not be asked for or exchanged. Parties must not attempt to contact each other or transact outside the marketplace.
Can I talk to a real person?
Yes, when you ring us during business hours you will always speak to a real person. Call us directly on 0800 286 286. We are open Monday to Friday between 9am to 5pm (NZST) except public holidays.
How secure is my information?
Our 256-bit encrypted, secure document portal allows a matched investor to log in using only their assigned password, to view the borrower's loan information and supporting documentation, which is redacted to protect the borrower’s privacy.
Registered investors are bound by non-disclosure provisions, to not disclose any information about borrowers and their loans. Zagga takes this requirement very seriously and will act against any investor who breaches this. Activity on the portal is tracked and audit-trailed.
Furthermore, our robust systems have been rigorously tested to prevent unauthorised access or inappropriate use of confidential information. They are constantly monitored and managed by external computer security specialists. We continually update our security settings and have them tested by independent third parties for industry standard compliance.
Whenever personal information is sent from our website it is protected by the high security levels which are standard practice in internet banking and large scale e-commerce sites and involves the use of a 256-bit encryption string. Encryption protects your information when it is transmitted by converting the information into an unreadable code using a ‘key' and decoding it using the same key. The longer the key the more difficult it is for hackers to break the encrypted code.
How do I lodge a complaint?
Your satisfaction is of utmost importance to us so if you have feedback, a concern or complaint about any part of our service, we would like to talk to you so we can try to fix the problem. Call us on 0800 286 286. We are open Monday to Friday between 9am to 5pm (NZST), except public holidays. Or if you prefer, email us at anytime.
If you are a borrower and we are unable to agree on how to resolve your issue, you can contact Financial Ombudsman Service (FOS), an independent, external dispute resolution scheme provider. The contact details are:
T 0800 347 257
A Financial Service Complaints Ltd
PO Box 5967
You can quote Zagga's FSCL Membership Number - 5580.
What happens if Zagga goes into liquidation?
Zagga is required by the Financial Markets Authority to have a plan in place in the unlikely event of Zagga going into liquidation. In this scenario a third party would be appointed to oversee the administration of all existing loans.
Investors' funds DO NOT pass through Zagga's bank account, and are not at risk should Zagga go into liquidation. Zagga has a comprehensive audit schedule and processes approved by the Financial Markets Authority.
What do I do if something goes wrong?
If you have a problem, concern or complaint about any part of our service we would like to talk to you so we can try to fix the problem. You can contact us by phoning 0800 286 286 or by email at email@example.com.
However, if we are unable to agree on how to fix the issue you can contact our dispute resolution scheme provider, Financial Services Complaints Limited (FSCL) www.fscl.org.nz. All financial service providers are required by law to belong to a dispute resolution scheme and FSCL provides a free and impartial dispute resolution service to our customers. So if you feel you need independent advice we encourage you to contact FSCL, quoting our membership number 5580, as soon as possible on 0800 347 257 or by email at firstname.lastname@example.org.
Why did my account log out?
Once logged in, your account will be timed out after 15 minutes if you do not use it. This is to protect your information. You will need to log in again if you wish to use your account.
Can I change my personal details?
Yes, go to your 'my Zagga' account and click on your profile to edit your personal details. You can also change your direct debit details and password here.
How do I stop you sending me emails?
We will not send you emails without your permission. However, in the unlikely case you do receive an unwanted email, simply click on the unsubscribe link to be taken off our list. Please note, if you are an active borrower or investor you cannot unsubscribe from emails that are related to your account and activity.
What is your question and answer policy?
To assist with investment decisions, investors can ask the borrowers questions relevant to their loan via our website. We will forward the question to the borrower and convey the answer back to all investors.
A borrower does not have to answer these, however, their loan is more likely to be funded if they do. Borrowers who are honest and open will be more attractive to investors than those who do not respond to questions.
You must not ask for, or provide, any contact details or information that could be used to identify yourself or the other party (investor/borrower). Your account may be terminated if you do so. If you have concerns about any of the above, please contact us immediately on 0800 286 286.