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Post by WestonKevTMP on Sept 10, 2019 16:30:04 GMT
pandaInternally we have been discussing how we can improve portfolio reporting, not only for individuals on their loans but the platform as a whole. The thing is, very broadly put detailed delinquency rates or buckets of arrears aren't important. Within the world of HCSTC some level of arrears is to be expected (much more than prime lending sites like Zopa or RateSetter), and reporting live arrears could be quite off-putting. For example, the majority of our customers who did not meet the original scheduled repayment dates are on rescheduled arrangements that are affordable to the customer. We are trying to be a transparent, fair and prudent lender doing the right thing in this maligned sector, and this is demonstrated by how we deal with arrears. A fair, affordable and reasonable payment schedule is arranged without question usually with the interest frozen at 0% and no fees applied. We feel this is the right approach to forbearance and building customer trust. It also means we get few few complaints, quite a miracle in this sector, which we take as positive feedback on how we treat customers. Therefore, what's important is interest income and capital payments made over a longer period than the maximum 3-month term, and critically what the final IRR is. This is why we report IRR for 12-month cohorts, with an average maturity 6-months after the final scheduled date. This gives time for rescheduled plans to perform and customers in short-term difficulty to get back on their feet. That said, how we report defaults and IRR will be changing. As I said, this is something we've wanted to do and have been designing the interface, but also driven by the FCA PS19/14 Credit Policy paper ( see HERE). So this is going to regulatory mandated anyway for 2020. Kevin.
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Post by WestonKevTMP on Aug 19, 2019 10:54:15 GMT
Comrades, Thought you might be interested to know we've just hit out £2m milestone; Lending has been growing steadily as we've refined our credit policies and partners to source loans. With the recent acceleration, any lender monies deployed currently is lent very quickly (and so less of a loss from inactivity). This comes shortly after reporting our latest IRR of 10.7% per annum as @ 1 July 2019 on loans written from July 2018 to March 2019. This is a number we update monthly. Remember that Capital is at Risk and there is no FSCS protection when lending with The Money Platform. The full risk statement can be found here, www.themoneyplatform.com/lender-risks . Kevin.
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Post by WestonKevTMP on Aug 13, 2019 8:40:02 GMT
For the non accountants among us, does this mean if I had invested in every single loan from July 2018 until July 2019 I would have made at least 10.7% ? It's an annualised figure, not the actual returns of the loans from July 2018 to March 2019. The period of investment to date doesn't allow for a 12 month investment performance period. So the actual returns are extrapolated to 12-months as calculated by the MS office excel formulae IRR using the cash flows of the loans written within July 2018 to March 2019. So if you'd invested in every loan within this period the IRR would have been 10.7%, however the investment performance period is less than 12-months and so you're actual cash return would be proportionally lower.
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Post by WestonKevTMP on Aug 1, 2019 8:40:50 GMT
Comrades, By way of an update and including the most recent monthly loan cohorts performance, the IRR for lenders since July 2018 is now 10.7% per annum. No subjective assumptions are made in this IRR calculation as to the final repayment amount of a loan or default rates. This is the IRR as at 1 July 2019 on loans written from July 2018 to March 2019 i.e. all loan cohorts that have been through their full contractual repayment schedule. We are still receiving payments on some of these loans through payment plans, so the picture should get better because the IRR is calculated based on cash received to date. The IRR is a little lower than reported to this Forum in May (11.3 % p.a.) but some volatility is to be expected in all loan books. This is all encouraging, providing consistent returns to our update in May 2019. Remember also that Capital is at Risk and there is no FSCS protection when lending with The Money Platform. The full risk statement can be found here, themoneyplatform.com/lender-risks . Our current IRR is currently better that our target rate of return. Kevin.
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Post by WestonKevTMP on Jun 1, 2019 10:24:44 GMT
Agreed, I have no idea of individual lenders net worth, sophistication or their understanding of risk. Fair enough. We can only design a return we think is fair for the risk, and make very clear that investment is not FSCS protected and that Capital is 100% at risk.
In fact, I suspect this question will be troubling the FCA over the coming years as they try to regulate for this problem. Some lenders wanting higher returns look like they will face significant losses chasing 10%+ AERs. I'm sure some investors understood the risk reward ratio, but many did not. Or will claim they did not in hindsight. At this return, there were risks many didn't even foresee other than classic defaults (being sued!)
For my part, my preferred P2P investments are with the big players offering 5-6% returns (biggest holdings being RateSetter and Lending Works, followed by Asstez, Zopa, Abundance and Funding Circle). I also "dabble" with smaller amounts on very selective platforms like TMP.
In terms of if a 10-12% return is sufficient for lenders to invest with The Money Platform. That is an individual choice, with many factors. Including (perceived/known) risk of the platform, provision and personal risk reward ratio expectations. Lenders must make their own choice.
So I'd never say that your requirement for higher returns (30%) is wrong, that's where your assessment has finished. However, in my experience I think any return of 20%+ is generally not feasible and is way outside of my risk appetite. The graph of risk and return isn't a straight line, and the big drop-off for probable returns in my mind comes at 12%+.
Kevin.
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Post by WestonKevTMP on May 19, 2019 10:29:21 GMT
I'm afraid a return if 30% AER return from any investment is highly speculative, and isn't the type of platform I personally would recommend. I wish you luck elsewhere.
Over the long term, if the returns remains anywhere near 11% I would view that as a huge success in these economic times of low yields and turbulent markets.
As an aside, marketing or inducements of even higher expected returns has the added risk of attracting less sophisticated investors who don't fully understand the risk reward ratio, and the concept of diversification. If I saw 30%, I'd presume it was something a bit dodgy.
Kevin.
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Post by WestonKevTMP on May 17, 2019 13:44:34 GMT
Comrades,
We continuously review our loan portfolio performance to ensure that credit losses remain within our risk appetite, to reward lenders with a return matching expectations. The platform has been operating for over 2 years and has now matched sufficient volumes to allow us to make improved analytically driven risk decisions and implement improvements to the scoring models. This led to a significant number of changes to risk credit policy and operational factors in July 2018. Although we've always been making changes, this was a significant milestone to the way we manage credit risk,
The current returns as an IRR for lenders since July 2018 is 11.3% per annum for loans written July 2018 to January 2019 (i.e. completed loan cohorts, which is why Feb 2019 onwards isn't included yet). We will be publishing returns later in the year on our website but wanted to give forum members notice as we know many of our lenders found us through this site. All of our loans are for 3 months term or less, and so all loans up to January 2019 have now all passed their final payment dates. So they are either fully repaid, non-performing, or on a payment plan. We calculate the lender IRR as the cash received to date from borrowers on all loans in this period, and this is the actual 11.3% pa. annualised.
No subjective assumptions are made in this IRR calculation as to the final repayment amount of a loan or default rates. We are still receiving payments on some of these loans on payment plans and defaults, but this means the picture should only get better because the IRR is calculated based on cash received to date. For this loan cohort, the IRR of 11.3% is a minimum. I would estimate that a subsequent 12 month period (few plans are longer than this) is required to see the true final IRR.
Monthly cohort IRRs will of vary due to the statistically small numbers and also with seasonality, but we are managing the business to deliver steady returns over a period of time. It is worth caveating that we don’t force diversification through multiple loans, fractionalise loans between lenders or use a Provision Fund. As a result the 11.3% is an average for lenders, which significant individual deviations from this average. Lenders with small number of loans for restricted periods will experience dramatically different returns to the average. Any questions on individual performance should be communicated to the helpdesk, and will not be discussed on a public forum.
Unfortunately our early portfolio under performed versus what we are now delivering, although we continue to see money returned to lenders on these historic loans through recoveries. Volatility in the first year was extreme as we built volume and changed credit policy to be specific to our borrowers rather than be reliant on generic rules or scores. For full disclosure, the management team here are all lenders on the platform too (we join the queue, the same as all other Lenders), as are a number of our shareholders. I myself was an early lender and didn’t enjoy the returns that are now being delivered. Although depending somewhat on the luck of which loans were allocated, some lenders did enjoy double digit IRR returns.
My favourite description of The Money Platform on the forum was that we were the "roller coaster of P2P lending", and I think this was true. Capital is at risk and there is no FSCS protection. I personally only invest a small fraction of my invest able assets on any single P2P site, and would not use my ISA allowance where the risk is higher.
Kevin.
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Post by WestonKevTMP on Nov 29, 2018 8:08:10 GMT
Fake reviews are quite useful in a way. On the presumption that TrustPilot don't pay for the reviews, could an assumption be made that the service provider being reviewed has paid for them?
If the service provider is paying for fake reviews, then that tells you all you need to know about the integrity of the firm. And as a clear marker to stay away.
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Post by WestonKevTMP on Nov 9, 2018 22:51:34 GMT
I can't help but think that if 1000 of us got to together and put £1000 in that's a 10M fighting fund...and the lawyers only get paid when they do something...
With maths like that, I don't like the odds of sucess....
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Post by WestonKevTMP on Nov 2, 2018 17:54:02 GMT
Supply and Demand, innit. Except now and again when RateSetter do something silly upsetting the (money) supply side; Basically lenders have never been that elastic, and if lending volumes increase the returns can increase quite quickly to attract more cash....
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Post by WestonKevTMP on Oct 23, 2018 6:24:25 GMT
A few hundred Ccjs sent out might be one way to bring people to their scamming senses. I understand this is probably part jest, part frustration. But one problem with CCJs for lenders is the cost; The reality is it just isn't worth the cost. Why pay up front £1,000s when it is just throwing good money after bad. And once the CCJ is registered, the "threat" of the CCJ action has gone. This is actually a serious point, and why very few lenders actually implement CCJs.
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Post by WestonKevTMP on Sept 21, 2018 15:51:35 GMT
Comrades,
Late and default performance has always been our primary aim to minimise, as if these are to high then lenders will lose faith and not use our platform. As a pure P2P platform this is clearly integral. The other important aligning point is that the platform only takes payment when a loan is repaid, so a default doesn't help The Money Platform. This is very different to many other platforms that take a payment when the loan is issued.
However we do not use a Provision Fund. As a result losses are not averaged across all lenders, who must invest a minimum of £250 to lend a single whole loan. Inevitably, statistically there will always by a marginal but "unlucky" segment of our lenders that see more bad debt than income. Whilst many lenders will be enjoying enhanced returns above expectations. This is not only unfortunate, but a bi-product of the platforms design with no fund or pooled nature of lending. We do hope to change this in the future, but this is a significant regulatory and technical change. Currently, a lenders only protection is diversification.
That said, we've made a number of changes in the last 6-months that has had a significant improvement bad debt performance. We have more competition in the market now so I have to be limited with what I say, but the changes includes;
1) A more robust statistical use of scorecards (including our internally derived version) based on loans written by The Money Platform rather than industry figures
2) Reduced acceptance rates, declining a number of segments based on customer "intent" rather than just the credit performance data from the credit bureaux. Bad debt performance mirrors acceptance rates, but fixed and variable costs (e.g bureaux) increase with applications that have to be paid even for declines - so this is a constant battle.
3) Dual bureaux decisioning, in that we've in creased the data obtained from our second bureau (CallCredit, alongside the primary Equifax)
4) Collections processes, have been significantly improved with a far larger in-house window of activity. This is also using two new technological methods that have improved monies received (I can't go into detail here for competitive reasons)
Hopefully some our existing lenders will already have seen the impact of the above changes, with more payments received
Shortly we will be announcing some financial news that provides the platform with more sustainability, alongside an increased team. Also personally I've had a lot of experience in the Open Banking world, and I expect to use this new regulation and technical ability to good use for The Money Platform - but the timescales on PSD2 effectiveness take us into 2019.
Kevin.
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Post by WestonKevTMP on Sept 20, 2018 21:39:15 GMT
They said that Kevin started posting on the forum before he was employed by RS. I got the impression that RS became gradually more uncomfortable .... For the record this isn't true. I joined RateSetter in July 2013 and this forum didn't even exist then. I was a lender before I joined RateSetter, and was indeed a founding lender at Zopa over a decade ago. I posted only very occasionally on their forum before it was closed, but not often. And not before July 2013. I only posted on the Zopa forum when someone said something untrue about RateSetter (as an employee with the knowledge), or to simply wind up their PR staff. They were very uptight people in those golden early years. Kevin.
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Post by WestonKevTMP on Aug 2, 2018 21:37:56 GMT
The question is, do you want to attract quality borrowers?
Lower risk customers don't expect their loan to include any fees, just an interest rate. Where a loan is advertised with a fee up-front (even one they technically don't pay as its rolled into the original balance) alongside an interest rate it is biased self-selected to higher risk applicants.
So it was always the right choice for a bigger robust platform to take the provision funds over the lifetime of a loan, and not up front. If it was my choice, all loans and 100% of credit fees would be over the lifetime.
Kevin.
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Post by WestonKevTMP on May 31, 2018 9:53:28 GMT
Comrades, I thought I'd provide an update on regulatory risk, which is always a concern for higher APR platforms no matter how ethical or transparent. This is important for platform stability, which in turn is good for lenders (i.e. borrower default risk is usually most lenders primary concern, but it's actually platform failure that has caused total wipe-outs....). Today the FCA publishes a report on the outcome of their high-cost credit review ( www.fca.org.uk/news/press-releases/fca-publishes-outcome-high-cost-credit-review ). The result is very positive for The Money Platform, although it’s worth going back in history. Early this decade players like Wonga were treating customers poorly, notably with very high interest rates and rolling over debt. This resulted in the FCA’s investigation in 2015 ( www.fca.org.uk/firms/price-cap-high-cost-short-term-credit ) that resulted in these key changes; • Cost cap of 0.8% per day (including fees), • £15 cap on default fees, and • Cost cap of 100% (the mathematics of this meant that HCSTC lenders couldn’t just keep rolling debt over and racking up APR that resulted in rates over 5,000% APR) The impact of this cap was investigated by the FCA in 2017 ( FCA report: www.fca.org.uk/publication/feedback/fs17-02.pdf , and research paper www.fca.org.uk/publication/research/price-cap-research.pdf ). This report was very positive on the impact of the 2015 changes on HCSTC, stating “ maintain the price cap on HCSTC at its current level. That decision is based on the results of our analysis which we present in this paper which indicate the cap and other regulatory measures have been a success” What was interesting about the 2017 findings was that they were going to switch their focus to overdrafts – “ We have different concerns about both arranged and unarranged overdrafts. We have concerns about consumers’ long-term use of arranged overdrafts, at levels which are persistent, unsustainable, or both. Our concerns about unarranged overdrafts are also broader. Their use is often inadvertent, and charges appear high and complex.” Today’s report ( www.fca.org.uk/news/press-releases/fca-publishes-outcome-high-cost-credit-review ) reaffirms the 2017 findings. And the focus of this report continues to be overdrafts, but also rent-to-own, Home-collected credit and catalogue credit. As a result it is very good news for The Money Platform, in that it provides regulatory certainty for some time to come. With no changes proposed that impact our business. Kevin.
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