r00lish67
Member of DD Central
Posts: 2,691 
Likes: 4,048
|
Post by r00lish67 on May 26, 2017 6:33:49 GMT
I also agree that Zopa are treating lenders with a lack of respect in their comms - a lender's primary reason for using a safeguard product is clearly to avoid the pain of defaults, not for tax reasons.
Re: Ratesetter, I'll have a punt that they too will inform us of "exciting new higher rates" and the removal of that "pesky provision fund thing that just didn't seem to do it for lenders" within 6 months. I may be wrong here, but isn't the current nature of their product the big hindrance for full FCA approval? i.e. because of the 'insurance' offered by the PF, it's a bit too much like a bank. So I wouldn't be surprised at all.
|
|
happy
Member of DD Central
Posts: 397
Likes: 497
|
Post by happy on May 26, 2017 8:14:40 GMT
For me, any P2P investment where I have no control in choosing who I lend to or at least the risk band for those borrowers needs to include some form of risk pooling across all lenders. Safeguard and the RS PF provides this to an acceptable degree IMHO. The lack of investment control and no PF is the reason I chose not to go with Zopa Plus despite the potential upside. If I wanted to be involved in a blind lottery I would play The Lotto  |
|
|
|
Post by gidoppp01 on May 26, 2017 8:26:00 GMT
For me, Safeguard wasn't a big deal. There was pre-safeguard loans and I was happy to lend in A+/A markets and setting MY RATES. I was happy to choose my risk in pre-safeguard and the return was higher than any safeguard loans.
The real issue of Zopa plus is liquidity. Not being able to sell all the loans even if there is no missed payment history, no defaults and no arrears is an absolute joke.
FC offers more flexibility to sell a loan with the premium and discount.
|
|
happy
Member of DD Central
Posts: 397
Likes: 497
|
Post by happy on May 26, 2017 8:49:59 GMT
For me, Safeguard wasn't a big deal. There was pre-safeguard loans and I was happy to lend in A+/A markets and setting MY RATES. I was happy to choose my risk in pre-safeguard and the return was higher than any safeguard loans. The real issue of Zopa plus is liquidity. Not being able to sell all the loans even if there is no missed payment history, no defaults and no arrears is an absolute joke. FC offers more flexibility to sell a loan with the premium and discount. Thats my point, pre Safeguard you chose the risk band and/or rate and accepted the risk, Zopa Plus and Classic/Access do not but at least Classic/Access have a PF. Will the non-Safeguard replcement replacement product for Classic/Access allow this?
|
|
pip
Posts: 542
Likes: 725
|
Post by pip on May 26, 2017 9:00:05 GMT
One point and one question from me:
Point: The impending withdrawal of the safeguard lessens protection for current investors. The fund has always been able to use receipts to the safeguard fund from loans initiated after protected loan was made to help safeguard the investment. This will no longer be the case. In effect investors will be subject to REALLY finding out if the fund has sufficient funds to cover the lifetime of a loan without the fund having a constant source of funds topping it up. I wasn't going to mention the word Ponzi...oh my mistake? This is especially true for the very last people lending money through Zopa Classic.
Question: If there is money left in the safeguard fund after all loans have been repaid, will this be distributed to lenders and not Zopa, as I thought the trust should be run for the benefit of lenders not Zopa? If Zopa are planning to pocket the money then they should also guarantee that if the funds are not sufficient they will fund the shortfall, otherwise its a one way bet for them. Heads we lose, tails they win.
For the record I have never really liked the idea of safeguards or provision funds as they are not efficient, can give a false sense of security and allow the companies which control them to use them for dubious means with very little oversight.
|
|
ashe
Posts: 53
Likes: 36
|
Post by ashe on May 26, 2017 16:22:58 GMT
One point and one question from me:
Point: The impending withdrawal of the safeguard lessens protection for current investors. The fund has always been able to use receipts to the safeguard fund from loans initiated after protected loan was made to help safeguard the investment. This will no longer be the case. In effect investors will be subject to REALLY finding out if the fund has sufficient funds to cover the lifetime of a loan without the fund having a constant source of funds topping it up. I wasn't going to mention the word Ponzi...oh my mistake? This is especially true for the very last people lending money through Zopa Classic.
Question: If there is money left in the safeguard fund after all loans have been repaid, will this be distributed to lenders and not Zopa, as I thought the trust should be run for the benefit of lenders not Zopa? If Zopa are planning to pocket the money then they should also guarantee that if the funds are not sufficient they will fund the shortfall, otherwise its a one way bet for them. Heads we lose, tails they win.
For the record I have never really liked the idea of safeguards or provision funds as they are not efficient, can give a false sense of security and allow the companies which control them to use them for dubious means with very little oversight.
This is pretty much my view. That said, I do like the idea of safeguards in terms of it incentivising the platform to do its very best to avoid any damage to reputation if it runs out. Part of me wonders whether this is a move to deliberately make it less appealing for a while before re-introducing it under a 'we listened to our customers' pretence at a later date, given the lending queues currently and even before the ISA is launched.
|
|
angrysaveruk
Member of DD Central
binomial
Posts: 995
Likes: 638
|
Post by angrysaveruk on May 26, 2017 19:47:31 GMT
What are they going to do with what is left of the provision fund after 2022? Is the remaining provision fund going to go to the companies owners/ shareholders?  |
|
|
|
Post by gidoppp01 on May 27, 2017 8:46:50 GMT
Looking at the bigger picture on the personal loan market, Zopa is directly competing with RateSetter. Their rates are pretty similar on uSwitch www.uswitch.com/loans/I guess it is difficult to provide provision fund when the lowest rate Zopa offers is 2.9% for borrowers while Zopa classics offer 3.9% return with provision fund and allowing money access at the same time
Ratesetter manages to build up a large amount of provision fund because they build up rate margin, their 5 year income rate for lenders is currently 4.8%, it was @ 2.9% earlier this week for 5 year income. Ratesetter can easily build up provision fund by manipulating their market rate for investors, this is a different story for Zopa at the moment. The current return with RateSetter for one year income is 1.9%. Having said that, most of the early Zopa investors were looking for low risk a+/a loans @ 5~6% without safeguard, but I guess the 5-6% rate does not exist in the A+/A personal loan martket at the moment. |
|
ashe
Posts: 53
Likes: 36
|
Post by ashe on May 27, 2017 9:26:49 GMT
I don't really want to wind anyone up but I'd assume that the provision fund would remain with ZOPA. It was never the lenders money. It was always just a lump of cash, promised by the platform to fix certain problems. It'll remain funded sufficiently well relative to the existing loans as they run down but ultimately will return to the platform's bottom line safeguarding (sic) their continued profitability and secure future. That having being said, the reason given in the email for withdrawing the facility is clearly utter rubbish. If it's not being further funded after it is withdrawn to new funds, and defaults turn out to be a bit higher than Zopa's predicted figures, it may not be funded sufficiently well. It only takes a relatively small increase in defaults to wipe out any buffer there may be to cover anyone with newer loans.
|
|
Greenwood2
Member of DD Central
Posts: 4,241
Likes: 2,686
|
Post by Greenwood2 on May 29, 2017 12:22:56 GMT
Looks like safeguard was a victim of FCA authorisation, judging by developments on Wellesley. So I guess ratesetters 'Provision Fund' will also go when they get authorisation.
|
|
happy
Member of DD Central
Posts: 397
Likes: 497
|
Post by happy on May 29, 2017 12:32:26 GMT
Looks like safeguard was a victim of FCA authorisation, judging by developments on Wellesley. So I guess ratesetters 'Provision Fund' will also go when they get authorisation. How so? There are platforms that have gained full FCA approval that have provision funds, Landbay and LendingWorks are 2 examples.
|
|
Greenwood2
Member of DD Central
Posts: 4,241
Likes: 2,686
|
Post by Greenwood2 on May 29, 2017 13:41:59 GMT
Wellesley have said the regulator didn't like their provision fund, Zopa are getting rid of theirs just as they get authorisation. I don't know the other platforms maybe there is something structurally different. But it seems that provision funds are becoming a dying breed.
|
|
metoo
Member of DD Central
Posts: 540
Likes: 410
|
Post by metoo on May 29, 2017 13:42:26 GMT
I always thought that Zopa introduced Safeguard to exploit the growth opportunity to lure in more cautious savers when savings account interest rates dropped on the introduction of the govt's Funding for Lending. Safeguard with Rate Promise was what led me to start with p2p, having rejected Zopa previously as it didn't seem to compensate for the risk over fixed term savings accounts before that. Tax on interest before defaults was a factor there too.
The RS provision fund was also a challenge to Zopa at the time, as RS seemed to be offering a safer option with higher rates, though the RS 'never lost a penny' mantra was untested by crisis, and still is.
I don't see how RS can end their PF because unlike Zopa, RS lenders are not properly diversified across large numbers of borrowers. RS depends on the PF to spread risk across borrowers. Zopa always kept the minimum 100 borrowers per lender principle (ie minimum investment £1000 in £10 chunks), so they retained the option to end Safeguard, and avoided the need for a resolution event if Safeguard ever ran out of money.
The wall of new money expected with the ISA, combined with the fact Zopa already can't find enough quality borrowers to meet lending demand means they can take the decision to end Safeguard and avoid the complications it brings, as well as satisfy the regulator. If you read the Zopa blog, Safeguard was never expected to cover all defaults in a financial depression/crisis, yet many lenders may have carried that notion. Safeguard was only ever intended as a stabiliser of returns in normal times and a cushion in slight recessions.
We can't see what criteria the FCA applies to allowing provision funds to continue, but it must rest in the detail of the expectations of protection the fund is perceived to create for lenders. I think the regulator wants to be sure that all lenders understand their capital and interest are still at risk, that these are not like savings accounts.
Personally I have been drawing down my Zopa account ever since their Rate Promise promotion ended and I gradually discovered the wider range of p2p options, though capital preservation is still a main concern. Zopa remains a fairly low risk time-efficient option.
|
|
Greenwood2
Member of DD Central
Posts: 4,241
Likes: 2,686
|
Post by Greenwood2 on May 29, 2017 13:47:38 GMT
With the new T&Cs RS have said losses would be spread across lenders by reduction in rates or capital reduction in the event of the provision fund not being able to meet demand. This could easily be extended to a non provision fund product.
|
|
happy
Member of DD Central
Posts: 397
Likes: 497
|
Post by happy on May 29, 2017 14:13:11 GMT
We can't see what criteria the FCA applies to allowing provision funds to continue, but it must rest in the detail of the expectations of protection the fund is perceived to create for lenders. I think the regulator wants to be sure that all lenders understand their capital and interest are still at risk, that these are not like savings accounts. Well on that issue LendingWorks majors on safe lending and provides loan default insurance to add to the protection offered by the PF. This obviously passed muster with the FCA. I just wonder if it has more to do with a simple business model and well structured PF operation guidelines that allows the FCA to easily get their heads round things than any specific issue with Provision Funds themselves. I half suspect FCA approval could be being used as an excuse for the bigger platforms to ditch something they think they don't need to put the effort into anymore with so much lender money out there. Perhaps they think their lenders now don't remember 2008!
|
|
