cb25
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Post by cb25 on Jan 19, 2018 14:28:14 GMT
I think that transparent and 'fair' use of the PF is central to the future success of AC. Currently, 23.5% of my GBBA(1) total is in loan 227, which is currently suspended. If that loan goes t*ts up and the PF doesn't kick in, that'll be total wipe-out for me as far as AC goes. Though 20% max per loan strikes me as unnecessarily high, I could live with it if a) it was actually applied (lots of posts other than mine show it isn't), and b) the PF kicked in. I've yet to suffer a sizeable loss on AC (been investing since 2016), but the comments on the AC threads - and their own 'Actual Bad Debt Fund Usage' (to Nov 2017) of all £0.00s ! - don't fill me with confidence.
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Post by stuartassetzcapital on Jan 19, 2018 15:19:54 GMT
Good! Because it ain’t difficult having a well funded PF which never pays out. I’m amazed your "black box accounts" business model has lasted this long I think saying £2.5m is well funded is a bit of a stretch. How much does it cover? About £150m? With individual loans more than double the entire PF? Hmmm. Not for me. We are a secured business lender, not unsecured, so the size of the provision fund required is an entirely different calculation than, for example, an unsecured consumer lender. We have a c 0.5% expected loss across the loan book. For the PF protected accounts that is c £750k for the £150m you quote. Many loans would have no expected loss in the case of a default and some may have more and there are also sometimes issues with loan security in the business of lending. These are some of the reasons why we overfund the PF versus the statistical expected loss. Nonetheless your comment regarding the size should be in context of our business model and the loans we make and the security we take. Of course we also offer manual lending with no PF if that's preferable.
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Post by stuartassetzcapital on Jan 19, 2018 15:26:53 GMT
I think that transparent and 'fair' use of the PF is central to the future success of AC. Currently, 23.5% of my GBBA(1) total is in loan 227, which is currently suspended. If that loan goes t*ts up and the PF doesn't kick in, that'll be total wipe-out for me as far as AC goes. Though 20% max per loan strikes me as unnecessarily high, I could live with it if a) it was actually applied (lots of posts other than mine show it isn't), and b) the PF kicked in. I've yet to suffer a sizeable loss on AC (been investing since 2016), but the comments on the AC threads - and their own 'Actual Bad Debt Fund Usage' (to Nov 2017) of all £0.00s ! - don't fill me with confidence. I feel it is unhelpful to readers to suggest that the PF wouldn't kick in when it already has. Recoveries with secured loans can take a while if done well and treating all parties fairly. For example we have always funded the recovery and legal costs on problem loans to date ourselves and so that certainly should be recognised as a pay out as we have not asked investors to cover these costs (considerable in some cases) in advance of any recoveries. Perhaps we have not helped ourselves by not publishing this substantial funding figure carried out to date. We do accept that the system limitation on interest payments being paid to investors by the PF when they are delayed has been unacceptably slow in being fixed and we have apologised but it needs a complex technical solution that chris is working on. Nonetheless all expected losses and known likely losses in calculations carried out to date on investment account holdings are more than covered by the PF.
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stub8535
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Post by stub8535 on Jan 19, 2018 15:35:11 GMT
I think that transparent and 'fair' use of the PF is central to the future success of AC. Currently, 23.5% of my GBBA(1) total is in loan 227, which is currently suspended. If that loan goes t*ts up and the PF doesn't kick in, that'll be total wipe-out for me as far as AC goes. Though 20% max per loan strikes me as unnecessarily high, I could live with it if a) it was actually applied (lots of posts other than mine show it isn't), and b) the PF kicked in. I've yet to suffer a sizeable loss on AC (been investing since 2016), but the comments on the AC threads - and their own 'Actual Bad Debt Fund Usage' (to Nov 2017) of all £0.00s ! - don't fill me with confidence. I feel it is unhelpful to readers to suggest that the PF wouldn't kick in when it already has. Recoveries with secured loans can take a while if done well and treating all parties fairly. For example we have always funded the recovery and legal costs on problem loans to date ourselves and so that certainly should be recognised as a pay out as we have not asked investors to cover these costs (considerable in some cases) in advance of any recoveries. Perhaps we have not helped ourselves by not publishing this substantial funding figure carried out to date. We do accept that the system limitation on interest payments being paid to investors by the PF when they are delayed has been unacceptably slow in being fixed and we have apologised but it needs a complex technical solution that chris is working on. Nonetheless all expected losses and known likely losses in calculations carried out to date on investment account holdings are more than covered by the PF. Sorry stuartassetzcapital but are you saying that recovery costs come out of the pf or did you fund them from fees and cashflow?
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n
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Yet another Nick
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Post by n on Jan 19, 2018 15:43:14 GMT
I read it as AC cover the costs and then recover them again once the recovery is complete.
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stub8535
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Post by stub8535 on Jan 19, 2018 15:48:52 GMT
I read it as AC cover the costs and then recover them again once the recovery is complete. Except sturatassetzcapital is stating that it should be recognised as a payout. I want to establish if the costs are drawn from the PF and then replaced.
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cb25
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Post by cb25 on Jan 19, 2018 15:51:07 GMT
I think that transparent and 'fair' use of the PF is central to the future success of AC. Currently, 23.5% of my GBBA(1) total is in loan 227, which is currently suspended. If that loan goes t*ts up and the PF doesn't kick in, that'll be total wipe-out for me as far as AC goes. Though 20% max per loan strikes me as unnecessarily high, I could live with it if a) it was actually applied (lots of posts other than mine show it isn't), and b) the PF kicked in. I've yet to suffer a sizeable loss on AC (been investing since 2016), but the comments on the AC threads - and their own 'Actual Bad Debt Fund Usage' (to Nov 2017) of all £0.00s ! - don't fill me with confidence. I feel it is unhelpful to readers to suggest that the PF wouldn't kick in when it already has. Recoveries with secured loans can take a while if done well and treating all parties fairly. For example we have always funded the recovery and legal costs on problem loans to date ourselves and so that certainly should be recognised as a pay out as we have not asked investors to cover these costs (considerable in some cases) in advance of any recoveries. Perhaps we have not helped ourselves by not publishing this substantial funding figure carried out to date. We do accept that the system limitation on interest payments being paid to investors by the PF when they are delayed has been unacceptably slow in being fixed and we have apologised but it needs a complex technical solution that chris is working on. Nonetheless all expected losses and known likely losses in calculations carried out to date on investment account holdings are more than covered by the PF. Stuart, If the PF has already kicked in, why does AC's own figures 'Actual Bad Debt Fund Usage' show all 0.00%s ? Are you saying the payouts were all less than 0.005% ? Whatever the truth is, strikes me there is a case for much greater transparency on the part of AC.
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jlend
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Post by jlend on Jan 19, 2018 16:04:53 GMT
I feel it is unhelpful to readers to suggest that the PF wouldn't kick in when it already has. Recoveries with secured loans can take a while if done well and treating all parties fairly. For example we have always funded the recovery and legal costs on problem loans to date ourselves and so that certainly should be recognised as a pay out as we have not asked investors to cover these costs (considerable in some cases) in advance of any recoveries. Perhaps we have not helped ourselves by not publishing this substantial funding figure carried out to date. We do accept that the system limitation on interest payments being paid to investors by the PF when they are delayed has been unacceptably slow in being fixed and we have apologised but it needs a complex technical solution that chris is working on. Nonetheless all expected losses and known likely losses in calculations carried out to date on investment account holdings are more than covered by the PF. Sorry sturatassetzcapital but are you saying that recovery costs come out of the pf or did you fund them from fees and cashflow? Interesting question. My thoughts for what it is worth. I assumed the recovery costs came out of the AC fees in order to treat everyone fairly. Every lender benefits from the recovery process equally I would have thought ie. the manual and automated account lenders both benefit. The fee taken by AC is the same I thought for both the manual and automated accounts from previous posts from AC. If AC in the future took money out of the PF to fund recoveries it may be seen that manual lenders are being supported by the PF at the same time. Unless of course the PF funded the contribution from automated lenders and the manual lenders were somehow asked to contribute in some way to a particular recovery. This sounds like it would be very messy to implement.
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Post by stuartassetzcapital on Jan 19, 2018 16:25:39 GMT
I feel it is unhelpful to readers to suggest that the PF wouldn't kick in when it already has. Recoveries with secured loans can take a while if done well and treating all parties fairly. For example we have always funded the recovery and legal costs on problem loans to date ourselves and so that certainly should be recognised as a pay out as we have not asked investors to cover these costs (considerable in some cases) in advance of any recoveries. Perhaps we have not helped ourselves by not publishing this substantial funding figure carried out to date. We do accept that the system limitation on interest payments being paid to investors by the PF when they are delayed has been unacceptably slow in being fixed and we have apologised but it needs a complex technical solution that chris is working on. Nonetheless all expected losses and known likely losses in calculations carried out to date on investment account holdings are more than covered by the PF. Stuart, If the PF has already kicked in, why does AC's own figures 'Actual Bad Debt Fund Usage' show all 0.00%s ? Are you saying the payouts were all less than 0.005% ? Whatever the truth is, strikes me there is a case for much greater transparency on the part of AC. We are currently effectively topping up the PF with the actual costs of those recoveries but paying the suppliers directly as they occur so there is no need to draw from the PF itself. All recovery funding is effectively coming from the part of the loan interest payments that represent our monitoring fee so we aren't using loan arrangement fees for this. I hope that helps.
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Post by stuartassetzcapital on Jan 19, 2018 16:28:21 GMT
I feel it is unhelpful to readers to suggest that the PF wouldn't kick in when it already has. Recoveries with secured loans can take a while if done well and treating all parties fairly. For example we have always funded the recovery and legal costs on problem loans to date ourselves and so that certainly should be recognised as a pay out as we have not asked investors to cover these costs (considerable in some cases) in advance of any recoveries. Perhaps we have not helped ourselves by not publishing this substantial funding figure carried out to date. We do accept that the system limitation on interest payments being paid to investors by the PF when they are delayed has been unacceptably slow in being fixed and we have apologised but it needs a complex technical solution that chris is working on. Nonetheless all expected losses and known likely losses in calculations carried out to date on investment account holdings are more than covered by the PF. Stuart, If the PF has already kicked in, why does AC's own figures 'Actual Bad Debt Fund Usage' show all 0.00%s ? Are you saying the payouts were all less than 0.005% ? Whatever the truth is, strikes me there is a case for much greater transparency on the part of AC. Yes as I say above we could have represented these payments we have made more clearly on that webpage. I have asked for this to be amended on the next iteration should it be agreed. We haven't been transparent enough on the extra financial support we have provided for investors above and beyond that already disclosed which is a positive error, rather than a negative one I feel but we will indeed improve this.
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Post by stuartassetzcapital on Jan 19, 2018 16:30:59 GMT
Sorry sturatassetzcapital but are you saying that recovery costs come out of the pf or did you fund them from fees and cashflow? Interesting question. My thoughts for what it is worth. I assumed the recovery costs came out of the AC fees in order to treat everyone fairly. Every lender benefits from the recovery process equally I would have thought ie. the manual and automated account lenders both benefit. The fee taken by AC is the same I thought for both the manual and automated accounts from previous posts from AC. If AC in the future took money out of the PF to fund recoveries it may be seen that manual lenders are being supported by the PF at the same time. Unless of course the PF funded the contribution from automated lenders and the manual lenders were somehow asked to contribute in some way to a particular recovery. This sounds like it would be very messy to implement. Yes as you have spotted there are some challenges, complexities and nuances to handle with this to be fair to all and rest assured those concerns and others have been fully considered in how we have structured this. It isn't all that simple, for sure.
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stub8535
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Post by stub8535 on Jan 19, 2018 17:34:13 GMT
Stuart, If the PF has already kicked in, why does AC's own figures 'Actual Bad Debt Fund Usage' show all 0.00%s ? Are you saying the payouts were all less than 0.005% ? Whatever the truth is, strikes me there is a case for much greater transparency on the part of AC. We are currently effectively topping up the PF with the actual costs of those recoveries but paying the suppliers directly as they occur so there is no need to draw from the PF itself. All recovery funding is effectively coming from the part of the loan interest payments that represent our monitoring fee so we aren't using loan arrangement fees for this. I hope that helps.
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stub8535
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Post by stub8535 on Jan 19, 2018 17:44:03 GMT
Thanks for your answer Stuart.
What you are saying is the monitoring charge, which comes off the borrower rate thus reducing interest to lenders, is used to pay these fees to third party recovery agents?
Seems like lenders are paying then, in a way, to recover debts without awareness.
As interest rates to lenders are trending downwards could it be that the gap to borrower rates is being widened to give yourselves an invisible costs provision fund at our expense?
I may be on absolutely the wrong track and doing am accountants trick with smoke and mirrors to make 2 and 2 equal 21 after tax.
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Post by stuartassetzcapital on Jan 19, 2018 17:54:47 GMT
Thanks for your answer Stuart. What you are saying is the monitoring charge, which comes off the borrower rate thus reducing interest to lenders, is used to pay these fees to third party recovery agents? Seems like lenders are paying then, in a way, to recover debts without awareness. As interest rates to lenders are trending downwards could it be that the gap to borrower rates is being widened to give yourselves an invisible costs provision fund at our expense? I may be on absolutely the wrong track and doing am accountants trick with smoke and mirrors to make 2 and 2 equal 21 after tax. Hi. All valid questions but I can confirm that we have not widened the monitoring income margin that we deduct from the borrower rate before paying investors. That is pretty consistent for a long time and is typically 0.9% from the borrower rate. So what lenders have seen with the MLA rate reducing over time is the effect of lower borrower costs being passed directly on. Regarding the investment accounts therefore it can be seen that every penny difference between the MLA rate and the rate paid on the investment account is going into the provision fund for that account and is for the benefit of the investors. That's how it works and there are definitely no smoke and mirrors. I hope that helps.
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teddy
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Post by teddy on Jan 19, 2018 18:26:04 GMT
Stuart, will the PF be paying out any time soon on the four GEA turbine loans that have been suspended as of yesterday? I have £10.5K across these loans thanks to your system that's not supposed to allocate more than 20% of my holdings to a single loan, and that money's not earning me a penny. The activity posting from AC suggests things are not good.
I was never browning my trousers like this at Ratesetter. Sort your business model out or see your lenders abandon you.
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