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Post by p2plender on Aug 7, 2016 7:44:57 GMT
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ashtondav
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Post by ashtondav on Aug 7, 2016 8:12:42 GMT
I was less than impressed by this comment. How the heck did it happen?
I wouldn't risk my money with them. I believe they have a problem with fraud. I never got to the bottom of how someone was able to successfully take a loan out with rate setter using just my name and address and have it paid into their bank account. Surely, if you are lending money you'd check the name of the person banking the loan is the same as the applicant? I only became aware there was a problem when I received a letter regarding failure to pay the first repayment instalment. I have never had a problem with identity theft before or after these guys. With the exception that it happened twice!!! The second time rate setter did actually contact me to ask for confirmation I was the applicant so I was able to prevent it happening again! Not impressed!
Explanation, please RS...
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adrianc
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Post by adrianc on Aug 7, 2016 8:58:41 GMT
I was less than impressed by this comment. How the heck did it happen? I wouldn't risk my money with them. I believe they have a problem with fraud. I never got to the bottom of how someone was able to successfully take a loan out with rate setter using just my name and address and have it paid into their bank account. Surely, if you are lending money you'd check the name of the person banking the loan is the same as the applicant? I only became aware there was a problem when I received a letter regarding failure to pay the first repayment instalment. I have never had a problem with identity theft before or after these guys. With the exception that it happened twice!!! The second time rate setter did actually contact me to ask for confirmation I was the applicant so I was able to prevent it happening again! Not impressed!
Explanation, please RS... Given that this was a Mail comment, the first thing I'd be after confirmation of is that it DID actually happen...
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jnm21
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Post by jnm21 on Aug 7, 2016 10:28:18 GMT
As a RateSetter investor I would also like to know if it happened & how! That said, I can well believe that it could happen - a fairly major non-mainstream high double or even triple digit APR lender managed to lend someone not known at my address in 10+ years money at my address - they supposedly have local customer service staff who personally visit every applicant! I suggested that the one in my area needs glasses and/or investigated.
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jnm21
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Post by jnm21 on Aug 7, 2016 10:39:18 GMT
For those of us with higher than average rate loans, a resolution event would reduce the rate to the market average even if all interest was subsequently recovered. That alone is a sharp drop in future returns if not a loss of capital. Is that the case? I had never thought that far ahead - I am in the 5 year market at about 6.3% on average, so would be interested to know. Even taking the above to be 100%, I still think the resolution event gives the ultimate risk reduction by way of diversification. I hadn't fully considered that a RE would potentially lead to (though it would come from) an increase in defaults. I don't think the creditworthy borrowers I believe RS lends to would risk the credit stain of a default more lightly in the event of an RE - maybe I am naive in one or both of those beliefs.
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Post by westonkevRS on Aug 8, 2016 6:10:04 GMT
I was less than impressed by this comment. How the heck did it happen? I wouldn't risk my money with them. I believe they have a problem with fraud. I never got to the bottom of how someone was able to successfully take a loan out with rate setter using just my name and address and have it paid into their bank account. Surely, if you are lending money you'd check the name of the person banking the loan is the same as the applicant? I only became aware there was a problem when I received a letter regarding failure to pay the first repayment instalment. I have never had a problem with identity theft before or after these guys. With the exception that it happened twice!!! The second time rate setter did actually contact me to ask for confirmation I was the applicant so I was able to prevent it happening again! Not impressed!
Explanation, please RS... I can't possibly comment on this specific article as I don't know the details, and for obvious reasons I cannot provide details on our anti-fraud methods. What I will say is that RateSetter has an impressive record in fighting fraud. Across all channels we get around 30,000 applications for credit every month, and its estimated that between 1-2% of these include an element of potential fraud from 1st party "fib" to 3rd party impersonation. It's also harder to fight with small value high transactional business, such as point of sale finance. These needs to be done quickly with as limited customer interaction as possible. Some customers don't help by making things public, e.g. Date of birth on FaceBook or personal info on companies House. With these volumes it is inevitable that some will succeed. Unfortunately though sometimes there is human error (which is usually the root cause, rather than a system issue ) that allows a fraud through. But this volume is very very small, but it does tend to have a human impact and people are emotionally involved we try to be as efficient as we can and always ensure their credit record is not impacted. So I can categorically say that on loans covered by the Provision Fund, fraud is not a major issue, although we are constantly vigilante. Statistically it is minimal (I won't publish here, but happy to discuss in person with lender visitors to the office), near negligible impact on bad debt which tends to be credit risk in the majority. Either way, lenders are protected by the Provision Fund. Kevin.
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Post by westonkevRS on Aug 8, 2016 6:14:17 GMT
As a RateSetter investor I would also like to know if it happened & how! That said, I can well believe that it could happen - a fairly major non-mainstream high double or even triple digit APR lender managed to lend someone not known at my address in 10+ years money at my address - they supposedly have local customer service staff who personally visit every applicant! I suggested that the one in my area needs glasses and/or investigated. Including standard loans, point of sale, business and mobile phone lending - RateSetter has made something like 250,000 loans. It is unfortunately inevitable when lending on these volumes that some loans will be made to the wrong people. It's a question of tolerance (zero) and minimistion. It's got nothing to do with APR, all lenders take fraud very seriously. Not just to reduce losses but for regulatory Know Your Customers and AML compliance. Kevin.
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jnm21
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Post by jnm21 on Aug 8, 2016 8:41:47 GMT
So I can categorically say that on loans covered by the Provision Fund, fraud is not a major issue, although we are constantly vigilante. Statistically it is minimal (I won't publish here, but happy to discuss in person with lender visitors to the office), near negligible impact on bad debt which tends to be credit risk in the majority. Either way, lenders are protected by the Provision Fund. Overall I thought the two answers were OK, but I don't like the (over)reliance on/overstating of the provision fund - in the event of a significant downturn, it could be that the provision fund is not there. Further I find the idea of "we'll tell you if you call in to the office" quite infuriating - not everyone lives around the corner, which is why you run/we use an internet business!
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Post by propman on Aug 8, 2016 12:23:38 GMT
Is that the case? I had never thought that far ahead - I am in the 5 year market at about 6.3% on average, so would be interested to know. Even taking the above to be 100%, I still think the resolution event gives the ultimate risk reduction by way of diversification. I hadn't fully considered that a RE would potentially lead to (though it would come from) an increase in defaults. I don't think the creditworthy borrowers I believe RS lends to would risk the credit stain of a default more lightly in the event of an RE - maybe I am naive in one or both of those beliefs. the risk is that whoever manages the loans in run off is more concerned with recovering money quickly than as much as possible, possibly selling on some of the loans at a discount, while some investors might "try it on" if RS has hit the headlines for debt problems, while the regular follow up of missed payments might be less efficient (if only because of an increase in the need). I have met people who under-value their credit record (probably a sub-set of the common approach of discounting events in the future as they have poor credit now, so are not willing for short term hardship to rebuild credit worthiness over many months), only really wishing to avoid CCJs and playing brinkmanship until these are close.
Essentially the debt collector may not have the incentive of securing future investment, merely choosing to do the work required to fulfil what may be a fixed price (the fees due) contract as cheaply as possible. Also, if the fees were insufficient, not sure whether the provider could amend the proportion of borrower payments going to the PF or if this is fixed.
The reduction in rate is merely that all lenders will get the same return however high rate their loans were, tat will include a share of payments at 2% on the 3 year market!
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adrianc
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Post by adrianc on Aug 8, 2016 13:15:06 GMT
So I can categorically say that on loans covered by the Provision Fund, fraud is not a major issue, although we are constantly vigilante. Statistically it is minimal (I won't publish here, but happy to discuss in person with lender visitors to the office), near negligible impact on bad debt which tends to be credit risk in the majority. Either way, lenders are protected by the Provision Fund. Overall I thought the two answers were OK, but I don't like the (over)reliance on/overstating of the provision fund - in the event of a significant downturn, it could be that the provision fund is not there. If the provision fund isn't there, then RS isn't there. That's a resolution event.
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jnm21
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Post by jnm21 on Aug 9, 2016 8:06:12 GMT
I know if the provision fund isn't there that's a resolution event, but is there any evidence that RS wouldn't be there? There is explanation on the RS site about a run off (if RS isn't there) - the fees due to RS would be used to top up the money set aside for such an event, so I do not know if a resolution event would necessarily cause a RS collapse (if other institutions were collapsing & letting down investors, but the RE returned all capital plus some interest, that could see RateSetter able to continue/rebuild I would have thought).
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adrianc
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Post by adrianc on Aug 9, 2016 8:09:49 GMT
If the provision fund isn't there, then RS isn't there. That's a resolution event. I know if the provision fund isn't there that's a resolution event, but is there any evidence that RS wouldn't be there? There is explanation on the RS site about a run off (if RS isn't there) - the fees due to RS would be used to top up the money set aside for such an event, so I do not know if a resolution event would necessarily cause a RS collapse (if other institutions were collapsing & letting down investors, but the RE returned all capital plus some interest, that could see RateSetter able to continue/rebuild I would have thought). AIUI, the "resolution" part of the "resolution event" means the orderly closure of RS, with as many investors paid out as much of their investment as possible. I can't see how it could be triggered without leaving investors at least partially out of pocket.
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ashtondav
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Post by ashtondav on Aug 9, 2016 9:06:33 GMT
AIUI RS would go into Resolution mode if it incurred the same level of bad debt that ZOPA experienced in 2008. I don't think thats unlikely, so youre better off with ZOPA (who would still continue) if you have a glum world economic view.
At least, I think so?
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DeafEater
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Post by DeafEater on Aug 9, 2016 10:34:01 GMT
AIUI RS would go into Resolution mode if it incurred the same level of bad debt that ZOPA experienced in 2008. I don't think thats unlikely, so youre better off with ZOPA (who would still continue) if you have a glum world economic view. At least, I think so? Zopa didn't have a SafeGuard fund back in 2008 so all of the losses were borne by the lenders. Those lenders always knew it was likely they would lose SOME of their money, it was just a question of how much. Hence the only way Zopa were going to go bust in 2008/9 was if their lenders lost sufficient faith and money to make them run away. If a similar run of defaults were to occur today and Zopa's SafeGuard fund couldn't meet the demands on it, I suspect it might be a different story.
Investors are always told that this is an investment and regardless of any SafeGuard/Provision fund, you may not get back what you put in. However if that fund failed to pay up in bad times, it would cause such a loss of faith in the company providing it that I couldn't see them surviving.
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Post by propman on Aug 9, 2016 11:56:01 GMT
AIUI RS would go into Resolution mode if it incurred the same level of bad debt that ZOPA experienced in 2008. I don't think thats unlikely, so youre better off with ZOPA (who would still continue) if you have a glum world economic view. At least, I think so? Zopa didn't have a SafeGuard fund back in 2008 so all of the losses were borne by the lenders. Those lenders always knew it was likely they would lose SOME of their money, it was just a question of how much. Hence the only way Zopa were going to go bust in 2008/9 was if their lenders lost sufficient faith and money to make them run away. If a similar run of defaults were to occur today and Zopa's SafeGuard fund couldn't meet the demands on it, I suspect it might be a different story.
Investors are always told that this is an investment and regardless of any SafeGuard/Provision fund, you may not get back what you put in. However if that fund failed to pay up in bad times, it would cause such a loss of faith in the company providing it that I couldn't see them surviving.
Certainly in the early days (I think 2012), Rhydian was clear that he didn't expect that RS would survive a resolution event. All loans would be pooled and investors paid out in proportion to their holdings as money became available.
That means that investors lose control over the term of their investments and receive shares in all loans outstanding including those at less than their minimum level of return.
Any new loans would need to be kept separately (who would buy into a pool of debt including bad debts unless they wee sold at a discount?), while either the new loans weren't covered by a PF (ie Ratesetter's whole approach abandoned) or restarted from scratch. Not impossible, but a major dislocation. The only people in the sameposition as lenders to Zopa in 2008 would be the institutional investors. As seen in US, Institutional money is generally the most likely to cease during hard times, although it may well remain or even expand if RS were to perform better than alternative investments, even if all made losses. As only 6% or so of the investment money, this is a very small size to retreat to.
Zopa today has much more institutional money presumably outside the PF as well as some Pre-SG investors used to taking real credit risk and a growing Zopa Plus investor base who are probably less risk averse than the original Zopa investors pre-SG. I also think that they would be more likely to survive a significant downturn. In addition, if Zopa think SG Fund is likely to be insufficient, they will continue, but make reduced payouts for defaults. As a result, the investors retain their portfolios and some bad debt protection. Clearly continued safeguarded lending would be difficult, but a switch to a new unprotected Zopa Std unprotected product at lower risk should be relatively painless. Yes they would lose some new investment, but I suspect that the impact might be less overall than 2008.
- PM
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