Stonk
Stonking
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Post by Stonk on Dec 17, 2019 0:32:58 GMT
FC have made a mistake in defaulting loan 36419. Their comment states the reason as being that it is 97 days in arrears. In fact, it is only 12 days in arrears, and has a high probability of coming back on track. Its last 4 payments have all been made later in the month than scheduled, but all have arrived eventually (it has been a maximum of 33 days late).
Have they ever admitted such an error and reversed it?
It's just annoying because it is the largest of my remaining exposures!
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rrrupert
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Post by rrrupert on Dec 17, 2019 1:48:25 GMT
Not that I know of but it may be possible. Why does it matter to you if the loan is defaulted rather than late?
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Stonk
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Post by Stonk on Dec 17, 2019 9:09:49 GMT
(1) My account balance is reduced by the amount defaulted.
(2) I was satisfied with the borrower's attitude to repaying. They showed a desire and ability to repay (albeit slightly behind schedule), even though they may be struggling with cashflow. Now that FC have defaulted the loan, the borrower may start to behave differently. They have probably received a demand for immediate full repayment, which might instantly sink the company.
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Post by spareafewcoppersguv on Dec 17, 2019 12:07:34 GMT
Not that I know of but it may be possible. Why does it matter to you if the loan is defaulted rather than late? And you can't sell it once it has been defaulted, can you?
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Stonk
Stonking
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Post by Stonk on Dec 17, 2019 12:21:51 GMT
Not that I know of but it may be possible. Why does it matter to you if the loan is defaulted rather than late? And you can't sell it once it has been defaulted, can you?
Correct - add that as my number (3). I believe the loan had not been downgraded, so although it has often been late paying during the last few months it would still have been sellable about half the time.
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ashtondav
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Post by ashtondav on Dec 17, 2019 12:35:40 GMT
I wouldn’t want to buy or be allocated a loan that was consistently being repaid late or erratically - not a good sign.
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keitha
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Post by keitha on Dec 17, 2019 12:48:22 GMT
I believe once defaulted interest is also frozen, ie lets says loan defaults after 6 months and owes £95 on a £100 loan at 12%
as I understand it FC can claim the £95 plus any outstanding interest at that point, they can't claim the future interest.
but maybe one of the long serving lenders can tell me if they've ever had a default repaid with interest or not.
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Stonk
Stonking
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Post by Stonk on Dec 17, 2019 12:49:06 GMT
I wouldn’t want to buy or be allocated a loan that was consistently being repaid late or erratically - not a good sign.
It is better than one that is late and has stopped paying. I have another loan that has been doing a similar thing for years and I have every confidence that one will repay in full, except it will be 5 to 10 days late.
Arguably FC should downgrade a loan once it starts becoming erratic, thus rendering it unsellable. As it stood, until yesterday's default, it could have been sold to you (some of the time) and it wouldn't have mattered a jot that you did not want it!
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sl75
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Post by sl75 on Dec 18, 2019 8:59:59 GMT
(1) My account balance is reduced by the amount defaulted.
(2) I was satisfied with the borrower's attitude to repaying. They showed a desire and ability to repay (albeit slightly behind schedule), even though they may be struggling with cashflow. Now that FC have defaulted the loan, the borrower may start to behave differently. They have probably received a demand for immediate full repayment, which might instantly sink the company.
I've still several loans that were defaulted years ago, and continue to show "desire and ability to repay", albeit often on a reduced payment schedule (the ones who did payments close to the original contractual amount until recovered in full were fully paid up years ago).
Several of these have been regular as clockwork every month, and like other lenders, FC certainly don't take a "pay in full or don't bother paying anything at all" approach to defaults. Indeed, the "default" status may be in order to permit the borrower to make slightly lower payments (but over a longer period) that are affordable given the borrower's current cash-flow position.
The only practical difference for lenders with having pushed the "loan is in default" button is that all such repayments show up on the statement as "Principal recovery repayment for loan part XXXXXX" or "Interest recovery repayment for loan part XXXXXX".
There's some difference for tax purposes as well, which may result in you paying some tax in a later tax year than you would otherwise have done had the loan remained on schedule.
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Stonk
Stonking
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Post by Stonk on Dec 18, 2019 9:16:23 GMT
Nothwithstanding all of that, the reason given for defaulting the loan (that it was 97 days late) is factually inaccurate (it was actually 12 days late) and suggests FC has made an error.
I'd rather they had just left it alone. It was doing fine. As they say, if it ain't broke, don't fix it. Defaulting it will at best have no effect, but risks changing the dynamics for the worse.
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Post by shanghaiscouse on Jan 2, 2020 19:05:55 GMT
I don't think they can because what defaulted means is that they novate the loan (i.e. you lose ownership of your loan parts of it) to a different legal entity, FC Trustee. There is no mechanism in the T&Cs for another level of novation to revert the loan to "un-defaulted". The key legal element about defaulting is you lose legal ownership, hand it over to them on trust for you, and you grant them power of attorney to act on your behalf in their absolute discretion. This includes selling the debt to agencies, taking legal action, etc. Anything they get back, less additional costs incurred, goes to the trustees. I believe this is why they have the 'risk band removed' and "bad debt" categories, risk band removed is a recognition of some event which materially undermines the quality of the loan that they want to give you a timely notification of, but "bad debt" means it has been novated to the FC Trustee entity and you now have a different legal position to the loan, i.e. no longer an owner but a beneficiary of a trust.
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