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Post by ladywhitenap on Dec 4, 2014 17:46:21 GMT
It appears that currently the repayment method used by borrowers is by standing order.
Whilst this works for majority of borrowers, the less reliable ones can easily cancel or modify the instructions to their bankers and REBS won't know until a payment does not turn up.
I feel that it would be much better that REBS use Direct Debits to collect monthly repayments. To me this method has significant advantages
1) REBS can call for payment on the correct date (or next working day thereafter)
2) If 'dodgy' borrowers change the DD instruction, their bankers will inform the Payee immediately alerting REBS to enquire what is happening before the payment is due.
I may be wrong but I can't see any downside to this method from either party's point of view. The DD guarantee scheme protects the borrower against errors.
REBS should be able to call the shots on this and implement DD payment for forthcoming loans.
Discuss
Thanks
LW
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Post by edena on Dec 5, 2014 2:40:24 GMT
When completing a loan Rebuilding Society requests confirmation of a standing order as well as a direct debit through a third party company. However, when a DD fails you can end up in a situation where the recipient receives the money then has it pulled out of their account the next business day if it fails. It can be very messy. There is some info on how DD work here: gocardless.com/direct-debit/timings/ |
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Post by ladywhitenap on Dec 5, 2014 9:43:14 GMT
OK thank you for that info Edena.
When a SO fails to arrive it is either a change in instruction by the borrower or insufficient funds and in neother case does REBS get a notification.
However the DD method still seems preferable to me when compared to the SO option where REBS and the lenders are just left in mid air for days if a payment does not turn up.
From the info in the link, it seems that at day 4, the payment to REBS is confirmed and then it could be distributed to lenders.
LW
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Post by edena on Dec 5, 2014 13:10:19 GMT
I have done a lot of DD work over the years. DD's are like SO's in most senses.
The problem in this situation is that Rebuilding Society could receive a payment, disperse funds then find that 24-48 hours later the payment has been reversed due to insufficient funds. That would be a mess having to recoup that money from lenders. If they put a 48-72 hour hold on receipt of the funds then it could work.
In this instance, I think SO's would be a more sure way of getting funds, because if they are not in the account on time then you know there is an issue; rather than DO you think its ok then find out 1-2 days later it isn't because the payment is reversed.
Debit cards are quite a good solution though, you can charge with minimum cost 30-50p per transaction.
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Post by ladywhitenap on Dec 5, 2014 13:20:03 GMT
I agree that neither method is ideal but what really irks me currently is the number of times it appears that once a loan is in place, the borrower is changing their SO instruction. At least with a DD the payee gets informed as soon as the instruction is changed.
DDs give a feeling to me that REBS would be more in control. If it means a hold on the funds until day 4 then fine by me.
What do others feel about this?
LW
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johnfleet
Member of DD Central
Posts: 170 
Likes: 85
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Post by johnfleet on Dec 5, 2014 15:01:36 GMT
I suspect that most borrowers are in my position i.e. we don't care what method of repayment is favoured - we just want to see the money which we've lent in good faith to borrowers via RBS paid on the due date each and every month. No surprises makes for a happy lender.
The high levels of defaults experienced were a major reason in me switching away from Funding Circle in favour of RBS and I would hate to see - but I suspect that it's happening - RBS being unable to vet/manage their growing loan book to forestall late payments and defaults.
Frankly excuses about staff leaving/ IT problems / changing premises are hogwash. A DD or a SO should in no way be affected by these routine business experiences - that is rather the point of setting them up in the first place. I'm not sure exactly what more RBS can do to 'crack down' on the thankfully small minority of borrowers who abuse our goodwill in this way - but I hope for all our sakes that they can come up with something, else my funds will be 'flying' off to and prominent advertiser on this site....
John
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Post by ladywhitenap on Dec 5, 2014 15:35:02 GMT
I agree with you John. Part of my frustration lies with REBS ability to get a grip on the repayment solution.
To see message in the discussion threads such as "we are aware the payment is late and are trying to contact the borrower" are a bit limp to be honest and I've been trying to gee them up a bit with suggestions about revising payment methods - so far with no response showing a willingness to change.
LW
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Post by edena on Dec 5, 2014 17:07:46 GMT
If I was going to build a platform like this I would use SO or debit card. Both you know about immediately.
SO doesn't arrive, then there is an issue, Direct Debit could credit then reverse which is painful.
Debit card make the authorisation request, it fails, the money is not available.
Immediate confirmation of funds with debit card.
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