Greenwood2
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Post by Greenwood2 on Feb 15, 2021 20:35:48 GMT
Doesnt the money in the PF belong to the people who put it there ie the borrowers? I dont see anyone advocating that any surplus should be returned to borrowers who repaid their loans in full without recourse to the PF and therefore 'overpaid' interest to protect lenders. Surely morally that would be correct argument for any surplus? Borrowers paid a percentage into the PF as part of their loan agreement. Lenders recently had to support the PF which was never meant to be their responsibility.
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
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Post by beagle on Feb 16, 2021 11:14:06 GMT
Doesnt the money in the PF belong to the people who put it there ie the borrowers? I dont see anyone advocating that any surplus should be returned to borrowers who repaid their loans in full without recourse to the PF and therefore 'overpaid' interest to protect lenders. Surely morally that would be correct argument for any surplus? all institutions do this just not labelled provision fund. Mortgages, loans, car finance all borrowers put into a fund for capital loss. the borrower would not receive a rebate on this just as they would not if a bank sold a book of mortgages the risk contribution (in this case labelled the provision fund) is not rebated as the risk remains unless the loan is settled early - whereby the fees reduce.
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
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Post by beagle on Feb 16, 2021 11:20:04 GMT
Has anyone actually clarified the status of the provision fund with RateSetter?
It seems to me that any cash in the provision fund after the sale still (at least morally) "belongs" to the investors whose money was diverted there, and should be used to refund pro-rata as much of the 50% interest as it has the resources for.
I think MB/RateSetter would do well to pay out the entire cash balance of the PF to investors pro-rata to their contributions. Even better, if they arranged for the sale price to MB to be at a level that ensures every penny of withheld interest gets re-imbursed to investors on completion of the deal.
Whether legally required or not, it would seem a relatively cheap way to generate goodwill for MB.
I'd also be a little surprised (unless they're legally barred from doing so) if MB don't use the cross-selling opportunity to provide an easy way to immediately re-invest the proceeds in a MB-branded savings account of some kind.
the provision fund belongs to Ratesetter and so to metro bank. why would metro want to pay out the fund to investors? they then take on capital risk. they could have just bought the book at 80 pence in the pound and we all lose capital in exchange for some provision fund rebate. if they had not bought ratesetter then we would lose more than the future interest. i highly doubt metro care about the pocket of fanatical retail investors demanding future interest from a company that was on the cusp of collapse and thereby about to lose lots of capital and and charge us all fees for the luxury. if anything i think we should be grateful they bought ratesetter at all. if they had not - the queue would still be in process. regarding the last point - a MB branded saving product - all banks are paying 0.0000001% as they dont need to do more - as they are not making profit this is a dream for them - clean profit from low cost of funds with healthy lending. the rest - sadly - is not going to make any difference.
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sl75
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Post by sl75 on Feb 17, 2021 13:00:27 GMT
the provision fund belongs to Ratesetter and so to metro bank. why would metro want to pay out the fund to investors? they then take on capital risk. they could have just bought the book at 80 pence in the pound and we all lose capital in exchange for some provision fund rebate. if they had not bought ratesetter then we would lose more than the future interest. As I recall the PF was held in trust for the benefit of investors through a separate legal entity, rather than directly belonging to RS.
Consider the position before/during/after the deal:
1. before completion... investors hold loans worth £X. Borrowers are contracted to repay £X + £B, with investors receiving £X + £I, and the difference (£B - £I) going to the RS and/or PF, but expected to be overall larger than the expected losses to default. The PF holds cash worth £Y and further (defaulted) loans worth £Z (for simplicity, Z is the price MB are paying for these loans rather than any other valuation).
2. MB pays £X + £Z in total to acquire all loans. 3. Now investors hold £X of cash, and the PF holds cash worth £Y + £Z. MB then holds all the loans, and will profit by £B less any future defaults, together with any net amount recovered from the past defaults over and above £Z.
Separately, RateSetter have unilaterally diverted £D of investor interest to the PF. In a hypothetical scenario where everything else played out as it has now, but instead of diverting investor interest, they instead had a queue for claims against the PF (to be satisfied if/when the funds are available), the final position at step 3 would have the PF holding cash of £(Y + Z - D). At this point it would either have already settled all investor claims in full (D < Y + Z), or would be left with a shortfall ( D > Y + Z), with investors experiencing a final (small) loss on completion of the deal.
Switching back to the actual scenario, the cash in the PF is £Y+Z rather than £(Y+Z-D) only due to the interest having been diverted. As the only difference between the final position in each scenario is the diverted interest, why shouldn't we be made good on it?
Taking on capital risk is what banks do when lending, or when buying existing loan portfolios - in this instance, they will be receiving the borrower interest rate going forwards (rather than our lower investor interest rate) as compensation for that risk. They certainly don't need to take the PF too as double-compensation for the risk, and it would create unnecessary legal complications to do so (how can the £Z of defaulted loans be legally transferred to them if they're paying the consideration to themselves?)
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coogaruk
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Post by coogaruk on Feb 17, 2021 18:53:52 GMT
In light of some of the previous comments:
Yes, the PF ultimately belongs to RS (now MB).
The PF has only ever been there to protect investors. It was originally 100% funded by borrowers, until the 50% interest haircut introduced last May. The suggestion that borrowers should have any claim on it whatsoever is laughable in my view.
From mid-September to 28th January MB continued to snaffle 50% of my interest, having previously gone on record stating that RS would continue to run my loanbook down and that they (MB) would take no risk on it. Now, whether by accident, design or maybe sheer coincidence MB stands to gain 100% of the benefit of said snaffled interest.
So far as I can see MB has done nothing illegal or in contravention of the RS terms but I can't help feeling the situation stinks and that at the very least they have a moral obligation to repay the interest they took from me to line their own pockets.
I have not yet decided upon which course of action I will take but might wait until RS has closed my account before raising a complaint to file a claim for an amount at least equal to and certainly not less than the interest I received for the period Sep 2020-Jan 2021. The amount is small but I feel there is a principle at stake here.
If that fails then I will consider escalating to the FOS. That will ultimately cost MB whether I win or lose. I owe MB no loyalty. And they have failed to earn any respect from me.
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starfished
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Post by starfished on Feb 17, 2021 19:23:34 GMT
In light of some of the previous comments:
Yes, the PF ultimately belongs to RS (now MB).
The PF has only ever been there to protect investors. It was originally 100% funded by borrowers, until the 50% interest haircut introduced last May. The suggestion that borrowers should have any claim on it whatsoever is laughable in my view.
From mid-September to 28th January MB continued to snaffle 50% of my interest, having previously gone on record stating that RS would continue to run my loanbook down and that they (MB) would take no risk on it. Now, whether by accident, design or maybe sheer coincidence MB stands to gain 100% of the benefit of said snaffled interest.
So far as I can see MB has done nothing illegal or in contravention of the RS terms but I can't help feeling the situation stinks and that at the very least they have a moral obligation to repay the interest they took from me to line their own pockets.
I have not yet decided upon which course of action I will take but might wait until RS has closed my account before raising a complaint to file a claim for an amount at least equal to and certainly not less than the interest I received for the period Sep 2020-Jan 2021. The amount is small but I feel there is a principle at stake here.
If that fails then I will consider escalating to the FOS. That will ultimately cost MB whether I win or lose. I owe MB no loyalty. And they have failed to earn any respect from me.
Purely curious: - Do you think the bold should apply to everyone who contributed during that period or just those who have "stayed" since? - What do you think should happen to RYI fees for people who left after that announcement from Metro to buy RS but not take loan risk? If we had lost capital I would agree with you maybe but we are talking about (extra) interest when over at LW they are effectively applying negative interest seemingly with FCA approval...
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iRobot
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Post by iRobot on Feb 17, 2021 21:19:39 GMT
Couple of items from RS' blog announcement of the purchase which may throw some light on RS' (and, by inference, MB's) take on things: and... and...
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coogaruk
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Post by coogaruk on Feb 18, 2021 15:51:34 GMT
Couple of items from RS' blog announcement of the purchase which may throw some light on RS' (and, by inference, MB's) take on things: I am well aware of RS' take on things. I am reminded of some of their previous 'smoke and mirrors' posts of the past.
RS was a p2p platform, an innovative finance proposition providing a potential higher return to investors who accepted an element of risk.
MB is a fully regulated bank. They have a duty of care to treat their customers fairly. It will be interesting to see the FCA's, FOS, etc. take on things in due course.
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coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on Feb 18, 2021 16:00:57 GMT
Purely curious: - Do you think the bold should apply to everyone who contributed during that period or just those who have "stayed" since? - What do you think should happen to RYI fees for people who left after that announcement from Metro to buy RS but not take loan risk? If we had lost capital I would agree with you maybe but we are talking about (extra) interest when over at LW they are effectively applying negative interest seemingly with FCA approval... There's no harm in being curious!
I think the bold should apply to all interest taken from investors by MB for the aforementioned period.
As for the RYI money, I do not think there should be any recourse. The fees had always been there in some form or another and were quite transparent. I'm sure investors who chose to RYI did so based on their own personal situation and/or investment strategy.
I am not talking about 'extra' interest but earned interest that was taken from investors and will now be used for MB's sole benefit.
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