investibod
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Post by investibod on Feb 19, 2016 16:37:22 GMT
www.altfi.com/article/1757_ratesetter_provision_fund_updateHowever, we highly value the views of our investor community and, having listened carefully to them, have decided to suspend the use of the Provision Fund for this purpose with immediate effect. We have therefore also unwound the 0.6% of the Provision Fund balance that was being used this way. We will update our investors with more information shortlyI'm very critical of RateSetter on here, but kudos for listening. This issue was the first one that made me seriously consider pulling my funds. Great news indeed. As RS strive to be transparent, maybe they would like to publish a set of rules (not guidelines) of exactly how the PF is allowed to be used. I think that all/most of us are feeling more reassured by the announcement, but for me this could well reinstate the warm fuzzy feeling, and I can reverse the process of running down my investments.
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alender
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Post by alender on Feb 19, 2016 16:45:01 GMT
www.altfi.com/article/1757_ratesetter_provision_fund_updateHowever, we highly value the views of our investor community and, having listened carefully to them, have decided to suspend the use of the Provision Fund for this purpose with immediate effect. We have therefore also unwound the 0.6% of the Provision Fund balance that was being used this way. We will update our investors with more information shortlyI'm very critical of RateSetter on here, but kudos for listening. This issue was the first one that made me seriously consider pulling my funds. Agreed, RS move is a good one and it proves it will take into account the views of its investors. Like you I am generally critical of RS on here but it does not mean that I do not approve of a lot of what they do, we will tend to voice our concerns not what we are happy with. However I am still concerned on how this was allowed and whether the PF rules can be changed to do this or something similar in the Future. I am not so concerned with these arrangements in benign times but in less good times desperate people do desperate things and then keeping the company going (even if it is for a short time) is likely to take preference of investor concerns. There should be legal and binding rules to keep the PF s afe and solely for the purpose of provision against bad loans.
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alender
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Post by alender on Feb 19, 2016 16:56:43 GMT
Why are we investing in RS for property loans at < 6.5% with all the associated risks when we can get 12% elsewhere? Property loans are not risky in themselves if the value of the loan is covered by other secure assets or if the collateral on the loan has sufficient margin to take into account crash in the market. If RS get this right it should be a low risk loan.
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locutus
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Post by locutus on Feb 19, 2016 16:58:24 GMT
Why are we investing in RS for property loans at < 6.5% with all the associated risks when we can get 12% elsewhere? Property loans are not risky in themselves if the value of the loan is covered by other secure assets or if the collateral on the loan has sufficient margin to take into account crash in the market. If RS get this right it should be a low risk loan. I agree but that is not the point I was making. I can get property elsewhere for 12% so why invest in it for any less?
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spiral
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Post by spiral on Feb 19, 2016 17:10:09 GMT
I don't know why they didn't just plough it all into Zopa. Drive their rates down further and have it safeguarded to boot
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mark123
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Post by mark123 on Feb 19, 2016 17:22:08 GMT
Thank you RS for listening to the community and for suspending a policy which worried many of us.
It illustrates key differences between traditional companies and modern business models like P2P: increased openness, ability to hear feedback and to implement change quickly.
I guess this makes it more difficult or expensive to finance some loans but building trust with lenders and borrowers will prove more important in the long term.
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dorset
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Post by dorset on Feb 19, 2016 17:22:13 GMT
Must admit it was personal lending that attracted me to RS and away from FC. Certainly not interested in having money invested in prop especially not at this point in the cycle. All credit to RS in listening and stopping the use of the PF in that way. What however has now struck me is the extent to which RS is getting involved in the short term property funding sector. My fault entirely for not picking up on this up – I thought that I was lending to the personal loan sector and my investment in RS has not been getting much attention from me. Put in and ignore. I am however spending a lot of time checking and making property loans on FC and AC while ever conscious that there is a growing and significant “bubble” risk in the UK property sector. RS in property now makes me “overweight” in short term property loans to a degree that I cannot easily quantify. 5% from RS does not begin to reward that risk when I can double that elsewhere and importantly measure my exposure.
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Post by Deleted on Feb 19, 2016 17:45:11 GMT
However I am still concerned on how this was allowed and whether the PF rules can be changed to do this or something similar in the Future. I am not so concerned with these arrangements in benign times but in less good times desperate people do desperate things and then keeping the company going (even if it is for a short time) is likely to take preference of investor concerns. There should be legal and binding rules to keep the PF s afe and solely for the purpose of provision against bad loans. Yeah, the governance issue around the separation of PF and RS is still there, and so is the potential for these kind of conflicts to arise. IMO the PF ringfencing rules needs to be iron-clad. But at least RateSetter seem prepared to listen to this feedback. Lets see what happens.
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alender
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Post by alender on Feb 19, 2016 18:07:50 GMT
Property loans are not risky in themselves if the value of the loan is covered by other secure assets or if the collateral on the loan has sufficient margin to take into account crash in the market. If RS get this right it should be a low risk loan. I agree but that is not the point I was making. I can get property elsewhere for 12% so why invest in it for any less? I agree it is a good point, however all property loans are the not the same and it really depends if RS apply there usually prudent policy so these loans are less risky. Perhaps this is good point for discussion on here as other members may have more information on these loans.
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Post by westonkevRS on Feb 19, 2016 18:52:20 GMT
westonkevRS This issue is beginning to gather momentum and I would suggest you folks at RS take a step back and look at the bigger picture....... Mike Well, the folks a " pay grade" above me have listened and reverted. Personally for the reasons I've stated (i.e. the fund wasn't investing, just a short term process to fill a loan) I was happy. And there are few individuals that care more about the Provision Fund than me. But hey ho. Clearly our customers and lenders thought otherwise, and it is your money and your opinions that matter most. Rightly or wrongly, RateSetter has listened. Transparency won! There's been a few questions leftover on the forum and I'll try to answer on Monday when I'm back from hols. Thank you comrades, Kevin.
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Post by westonkevRS on Feb 19, 2016 19:20:13 GMT
The FT have also picked up on the reversion: www.ft.com/cms/s/299d15f2-d709-11e5-829b-8564e7528e54,Authorised=false.html?ftcamp=published_links%2Frss%2Fcompanies_financial-services%2Ffeed%2F%2Fproduct RateSetter made peer-to-peer loans from contingency fund
Lending platform to stop using provisional money after users complain
by: Aime Williams
UK-based peer-to-peer platform RateSetter has been lending to businesses from a fund set up to protect investors against losses, in a move that triggered complaints from users.
In a note published on its website this week, RateSetter said it had begun to lend up to 10 per cent of the £17.3m pot to provide immediate liquidity to businesses looking to borrow through the site.
On Friday, four days after revealing the practice, the company backtracked, announcing it would stop lending from the fund.
”We highly value the views of our investor community and, having listened carefully to them, have decided to suspend the use of the provision fund for this purpose with immediate effect,” it said.
The decision to lend from the fund — put in place as a safeguard against defaults for people investing money on its site — had triggered concerns from analysts over the increased risk to investors.
Cormac Leech, a P2P analyst at investment bank Liberum, said tapping into the fund would reduce the amount RateSetter had available to recompense lenders.
“Let’s say the loan book goes bad — the provision fund goes bad on the underlying funds,” Mr Leech said.
“Lending 10 per cent out is a little bit naughty. It feels like the provision fund is a rainy day contingency. Using it to fund loans feels inappropriately circular.”
Sam Griffiths, managing director of alternative finance data provider AltFi, said: “Surely a provision fund should only be used for that singular purpose of acting as a backstop for wider investments on the platform?”
P2P platforms have faced increased scrutiny after Lord Adair Turner, the former chairman of the UK financial regulator, warned that risks were building in the burgeoning industry.
Lord Turner, who ran the now defunct FSA during the credit crunch, this month told the BBC he was concerned that, over the next five to 10 years, P2P loans could be the source of losses that would “make the worst bankers look like absolute lending geniuses”.
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Post by Deleted on Feb 19, 2016 19:35:53 GMT
Well, if we needed an example of the reputational risk of dipping into funds that are supposed to be arms-length and ring-fenced...
...there is a concrete example right there.
If I was a potential new lender, did a Google search of RateSetter, and saw headlines like that in the FT, I would run a mile.
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alender
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Post by alender on Feb 19, 2016 20:39:09 GMT
Well, the folks a " pay grade" above me have listened and reverted. Personally for the reasons I've stated (i.e. the fund wasn't investing, just a short term process to fill a loan) I was happy. And there are few individuals that care more about the Provision Fund than me. But hey ho. Clearly our customers and lenders thought otherwise, and it is your money and your opinions that matter most. Rightly or wrongly, RateSetter has listened. Transparency won! There's been a few questions leftover on the forum and I'll try to answer on Monday when I'm back from hols. Thank you comrades, Kevin. Thanks for your gracious reply. I guess the one thing to be remembered is the customer is not always right but he may not always be the customer if ignored, IMHO RS have done the right thing. Look forward to your answers to the other questions, in the mean time enjoy your Hols.
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teddy
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Post by teddy on Feb 19, 2016 22:08:40 GMT
Credit to RS for listening to its lenders. I've been practicing my rotten fruit and veg throwing, but I guess that'll have to wait for another time.
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jimc99
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Post by jimc99 on Feb 19, 2016 22:41:09 GMT
Maybe the next lobbying campaign by lenders should focus on the RS use of lenders monthly funds to lend to longer term borrowers. This practise makes the longer term interest rates artificially low by influencing market forces to the detriment of lender returns. It also could lead to a liquidity crunch for the monthly lenders if too many withdraw or do not reinvest their money.
Anyone from the newspapers here?
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