Fairplace Faces Investigation by Federal Police

Fairplace, the first p2p lending service in Brazil, faces an investigation by the Federal Police (Polícia Federal). Launched in April Fairplace so far facilitated 2.5 million BRL (approx. 1.5 million US$) loans. Apparently the Central Bank requested an investigation as early as August 10th, claiming that Fairplace violates laws that prohibit companies that are not financial institutions to operate in financial markets.

In December then the Federal Public Ministry of St. Paul (Ministério Público Federal) asked the Federal Police to open an investigation. According to press coverage penalties for the possible violations range up to four years imprisonment.

Separate investigations are undertaken by the Brazil Securities Commission (Comissão de Valores Mobiliários (CVM)).

Founder Eldes Matiuzzo says his company does not provide loans but only offers a platform to match lenders and borrowers. He added that the company checked the legal situation before launching.

Nevertheless Fairplace suspended the auction of new loans on the site on Dec. 15th.

Fairplace – P2P Lending in Brazil

Fairplace.com.br recently launched the first p2p lending service in Brazil. With approx. 190 million inhabitants Brazil could prove an interesting market for peer to peer lending. While financial institutions are the most common source for loans, consumers face lots of paperwork and high interest.

Founder Eldes Matiuzzo knows that, for he worked 14 years for Unibanco. He says user response since the launch is promising with about 25 registrations per day.

Each loan application undergoes risk assessment (Fairplace uses Seresa Experian Data) and only about 20 percent of applications are approved.

Loan requests are listed for a 14 day auction. Borrowers pay fees only if the loan is successfully funded. Fees listed are 5% for one year loans and 8 percent for two year loans. There are additional fees for credit assessment and each repayment installment. Lenders are charged 2% of each repayment (repaid principal + interest).

Currently the average interest rate at Fairplace is 2.99 percent per month, which is much lower than the average for the Brazilian market.