Brainer
Member of DD Central
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Post by Brainer on Sept 5, 2020 1:14:02 GMT
I think you are underselling it as "committed to 'conversationally'". I fully believe that FS themselves saw the repayment priority to be as shown in my post above. There are other instances of loans where FS said that in line with the T&Cs they would take no fees as investor capital ranked ahead. IIRC CG dismissed these as one-off gestures in the last administrators report but that was not my understanding. As you say, the court will decide in the end.
Should the 5% stand I agree with the rest of your post, and I hope that is where efforts will be directed at that point. Also worth noting that if, as it now seems, CG are taking 5% of the loan value from here onward there will likely be more than c. £2.0m in the pot by the end, possibly a lot more. If anyone has an idea of how much of the loan book is remaining, maybe we can get a better estimate.
I'm sure FS did when that quoted post was written in 2016. Had they not been in administration, they may have even honoured the 'informal' * commitments made on the loans with imperfect charges. However, FS today is not FS of four years ago. The Administrators only need to deliver what is legally required of them, not what an erstwhile FS may have felt morally and/or ethically duty-bound to deliver - if only to avoid the risk of being dragged through the courts, or worse, the press! CG&Co's stance on this particularly sucks, in my opinion, but ... * When I wrote 'conversationally', I was referring to FS' waterfall quote made here on the forum. However, I had forgotten about how FS typically communicated with lenders. As a layperson, and regardless of the standing of what FS wrote here, I'm really rather surprised that what FS communicated to all lenders via formal Loan Updates isn't deemed as some kind of legal contract. Maybe it's a question of their not wanting to throw good money after bad, but I should have thought it worthwhile lenders in those loans collectively formally querying the Administrators on what grounds they had based their determination and then showing the response to FSAG's legal rep for an opinion. Perhaps that's already been done. Perhaps it a non-starter. No idea. As I mentioned it's not just the post written in 2016, FS said on multiple occasions that their fees ranked behind investor capital, including as late as 2019.
If we're just discussing the ranking priority and not the imperfect charges then it's not a case of FS potentially feeling morally duty-bound, it's my assertion that they believed the ranking in 6.2.5 was correct legally. If that turns out not to be the case legally and my assertion is true, then we have a situation where FS (or at least the early directors) seemingly didn't understand their own T&Cs, and therefore presumably never intended for them to be interpreted as they now are. I mean where do you even begin with that? How in the world are consumer investors supposed to understand the T&Cs of a platform with greater legal accuracy than the platform directors themselves? It's farcical.
As to the imperfect charges, I agree that may be a conversation worth having, especially if the 5% stands as there should be enough in the pot to cover those loans. AIUI, it's not that you can't take legal proceedings against a company in administration, it's that you need consent from either the administrators or a court. Whether this is a situation where that might apply I have no idea, it seems reasonable to me but when has that ever counted for anything with P2P administrations.
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Post by waryinvestor on Sept 5, 2020 10:57:04 GMT
Not by my reading of term 6.2.5:
6.2.5 Net proceeds of sale of Assets shall be used to settle amounts due in the following order:
1) Principal amount of Loan which was funded by, and is repayable to, the Investors (allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested); 2) Direct costs incurred by FundingSecure through the setting up and the administration of the Loan including, but not limited to, storage costs, referral fees and valuation fees up to the date of sale; 3) Interest due to the Investors up to the date of sale (allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested); 4) Administration fees due to FundingSecure not recovered through clause 6.2.5(ii) above; 5) The balance (if any) will be returned to the Borrower.And seemingly not from FundingSecure's own understanding of their T&Cs as discussed here, and which I quote below: It's an understandable 'reading' but not one I share. I think the 5% stands. Much more tellingly and having sought legal opinion, CG&Co thinks the 5% stands. This is being challenged with a court decision pending, so time will tell. That decision may turn out in favour of lenders, but IMO it won't. (I'm not even convinced it's a good idea that it should.) That's why, again IMO, efforts would be better spent trying to get CG&Co's 2.5% (+vat+exp's) deducted from that 5% at the FS level rather than charged direct against lenders at the loan level which, if you accept the 5% fee is in play, I think is just plain wrong. If the loan book realises 50% of the stated value at the onset of administration, that 5% would be worth c. £2.0m - that should be sufficient to cover CG&Co's fees and then some. (Direct 3rd party loan disposal costs - auctioneers, valuers, legal, etc - would still come directly off the top of individual loan realisations. It's 'only' CG&Co's direct costs which would be deducted from that 5% pool.) Secured Creditors - eg current directors and the like - may not appreciate the 'FS pot' being eaten into in that manner, but ... Probably also worth keeping in view that anything FS committed to 'conversationally' isn't being honoured by CG&Co. For example, lenders in those loan with imperfect charge arrangements were supposedly protected from capital losses with FS committing to 'stand behind' them. That's no longer happening. (Again, I think that's wrong and could / should be covered by the overall FS 5% pot and if lenders in those loans chose to pursue that, I'd be supportive of that action.) Iam getting lost in the terminology here. Just to make my point clear here - the 3% C&G Charges can come out of the 5% FS Charge still at the Individual Loan Level. So, for those Loans where the C&G Charges are covered by the 5% FS Charges, I see no point for C&G Charges to be charged separately to the Investors. For those Loans where C&G Charges are not fully covered by the 5% FS Charges, the remainder might be taken from the Investor Returns [but if the FS Charges are so high up in the waterfall, I don't see (m)any Loans where C&G Charges need to be recovered from the Investors].
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Post by waryinvestor on Sept 5, 2020 12:41:10 GMT
I had similar thoughts about the fees after reading the comments in this thread.
The FS fee was surreptiously added to the constitution when they realised 'all the loans' were going to default and need recovery, they take 5% from the investors for the effort and costs as it wasn't their fault ! That's fine but that was before Administration, why the hell are they still taking 5% when C&G are doing all the work that FS would have been doing to recover the loans ?
They are taking the 5% because it is a contractual entitlement in the terms & conditions, always has been and has always been on the Loan value not the realisation sum (the only changes have been an increase from 3 to 5% and changing it to be the proceeds from any means of sale rather than auction only but that was amended years ago), and that money is due to the creditors on whose behalf the administrators act. C&G are taking the 2.5% because CC agreed to allow them to take that sum to get things going, separate agreement outside of the contractual terms. The question is was the CC mislead as there was no indication that the 5% fee was applicable and that should have been spelt out.* Also I dont quite get the calculation of the fees as they were supposed to be allocated prorata between investors & creditors and I am unclear how the creditors bit is being applied. *Edit. As iRobot has reminded me of the DD thread this appears incorrect Well, for the Loan 3934175822 (Mix*** u** Pro***** Cov*****), this is NOT True. On this Loan, a deposit from a prospective buyer was forfeited and the Recovered Amount was more than the Loan Amount. However, from my Calculations, they have applied the 5% Charge NOT on the Loan Amount but on the Higher Recovered Amount ? Also, the 3% C&G Charges were applied to the Recovered+Forfeited Amount, NOT the Recovered Amount ? So, they are charging the amount that suits them. I can provide the details of the Calculations in DD Central, as I think this would not be permitted on this open Forum. I can provide the exact Calculations on DD, as it might not be allowed on this Open Forum.
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wishy
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Post by wishy on Sept 5, 2020 14:45:37 GMT
I also read it as meaning that the 5% fees come out as part of the 4th priority. If it was intended that the fees were not included in 4, then why didn't it read:
6.2.4 An additional administration fee of 5% of the Loan value will be deducted from the net proceeds of sale of the Asset and paid to FundingSecure (after deduction of all selling expenses such as commissions).
6.2.5 Net proceeds of sale of Assets shall be used to settle amounts due in the following order:
1) Principal amount of Loan which was funded by, and is repayable to, the Investors (allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested); 2) Direct costs incurred by FundingSecure through the setting up and the administration of the Loan including, but not limited to, storage costs, referral fees and valuation fees up to the date of sale; 3) Interest due to the Investors up to the date of sale (allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested); 4) Administration fees due to FundingSecure not recovered through clauses 6.2.4 and 6.2.5(ii) above; 5) The balance (if any) will be returned to the Borrower.
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