james
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Post by james on Nov 29, 2016 12:45:16 GMT
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upland
Member of DD Central
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Post by upland on Nov 29, 2016 14:10:08 GMT
I heard this on the news this morning & would be interested too.
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duck
Member of DD Central
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Post by duck on Nov 29, 2016 15:54:02 GMT
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Post by MoneyThing on Nov 29, 2016 22:43:48 GMT
Acknowledged.
Spoke with both lenders today and they are happy to give their respective viewpoints. Will revert back once received.
Regards,
Ed
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james
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Post by james on Nov 29, 2016 23:21:08 GMT
Thanks Ed. There's really not much for them to say beyond that they are paying attention to developments and will assist the FCA as appropriate but it's nice to have it from them.
It'd be nice if they are offering lower cost loans or better other terms than elsewhere to demonstrate one of the potential values of alternative finance, though. That's one of the aspects of P2P that is of interest to me. AE may have particularly good availability of credit arguments given the customer target market for the HP.
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Post by MoneyThing on Nov 30, 2016 16:23:27 GMT
Afternoon,
Short comment from CS:
"From my perspective, I do not believe the FCA’s wider review of “higher cost” credit products will have much, if any, effect on our business. The fact that pawnbroking has a high redemption rate, very low level of complaints, and a process in place whereby borrowers are provided with any surpluses resulting from the disposal of their items, are all ‘positives’ that work in the services favour, as customer detriment is minimal.
Given all these factors, there is little to indicate that price is an issue, or that it needs to be capped.
The FCA have already implemented a rule whereby if a pawnbroker intends to pursue a customer in the event of a deficit after the disposal of the customer’s item(s), a creditworthiness check has to be conducted beforehand to demonstrate affordability. Most pawnbrokers do not pursue deficits, so this practice would only affect a small proportion of loans.
Further, CS lending rates are very competitive, with some as low as 2.9% per month so in the unlikely event of a price cap on pawnbroking, I feel we would not be adversely impacted."
Kind regards,
Ed
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Investboy
Member of DD Central
Trying to recover from P2P revolution
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Post by Investboy on Dec 1, 2016 16:54:42 GMT
"as low as 2.9% a year" you say? That's 34.8% a year - I would not call it low. And this is "as low" so I guess it can only go up from there. Shame we as lenders only see 1% a month out of it  |
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am
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Post by am on Dec 1, 2016 17:07:18 GMT
"as low as 2.9% a year" you say? That's 34.8% a year - I would not call it low. And this is "as low" so I guess it can only go up from there. Shame we as lenders only see 1% a month out of it If it compounds it's 40.9%. Anyway, you're lending to CSP, not to their borrowers, and CSP is probably considered a better risk.
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james
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Post by james on Dec 1, 2016 20:54:23 GMT
"as low as 2.9% a year" you say? That's 34.8% a year - I would not call it low. And this is "as low" so I guess it can only go up from there. Shame we as lenders only see 1% a month out of it Low for the market. One of the features of lending to those with poor credit histories is higher default rates and hence costs that come out of the gross.
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Post by MoneyThing on Dec 2, 2016 15:38:54 GMT
Afternoon,
Comment from AE:
“We are proud to provide a service to cater for the increasing number of people being let down by the traditional lenders.
Our customers need a car in order to be able to get to work or to be able to work, and for other family purposes, but many find it impossible to obtain finance for a variety of reasons.
We at AE do not discriminate, and as a responsible lender we know how important it is that any potential customer can afford to repay such borrowed monies. Where we differ to many of our competitors is that we do not credit score, but base our decisions on the customers individual circumstances. We believe credit scoring only shows credit worthiness, not the ability to pay. We review affordability by using the customers bank statements looking at actual incomings and outgoings, and perform a credit search considering all circumstances.
Our charges are in line with this market sector. We welcome a review by the FCA whereby we can demonstrate how we are assisting in the growth of the economy by filling a gap for much needed car finance for customers turned away by the traditional lenders.”
Kind regards,
Ed
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Post by GSV3MIaC on Dec 2, 2016 21:48:32 GMT
"as low as 2.9% a year" you say? That's 34.8% a year - I would not call it low. And this is "as low" so I guess it can only go up from there. Shame we as lenders only see 1% a month out of it Low for the market. One of the features of lending to those with poor credit histories is higher default rates and hence costs that come out of the gross. /mod hat off IIRC the FCA were talking about (possible) caps of 'not more than 100% interest' (maybe over the life of the loan - i.e. pay no more than £10k for a £5k car?), in which case the ones we are funding are probably in the clear anyway.
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james
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Post by james on Dec 2, 2016 22:18:35 GMT
IIRC the FCA were talking about (possible) caps of 'not more than 100% interest' (maybe over the life of the loan - i.e. pay no more than £10k for a £5k car?), in which case the ones we are funding are probably in the clear anyway. The cap is for high cost short term credit, which by definition is terms up to 12 months and an APR of at least 100%. HP cars are unlikely to be completely or substantially repaid within twelve months in at least a lot of cases, I suppose, so it wouldn't be directly affected by the HCSTC cap. But the review is not confined to HCSTC, instead covering most types of high cost credit including overdrafts and: "2.1 The main types of high-cost credit are HCSTC (including payday loans), home-collected credit, catalogue credit, some rent-to-own, pawn-broking, guarantor and logbook loans. Other credit products – such as motor finance, credit cards and overdrafts – may be high-cost, particularly for less creditworthy customers or depending on how they are used." That includes both AE and CS within the terms of the review. The HCSTC cap is: 1. 0.8% of principal per day on all interest and fees for the agreed loan term and when refinancing. 2. 100% of amount borrowed including all interest, fees and charges. So a consumer can never pay more than 100% total. 3. for defaulters, a cap of £15 on fixed charges and interest can't be above the initial cost cap level. One notable response to the cap was firms changing the term of loans so that terms of 3-4 months have shown a big increase vs up to a month on the basis that that is the profit-maximising term within the price cap. 0.8% a day reaches 100% after 125 days, circa 4.1 months. Hence 3-4 months sweet spot depending on initial charge level.
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