pikestaff
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Post by pikestaff on Sept 17, 2014 13:51:12 GMT
formertrader please don't be put off by the abuse from some users, a differerent perspective is welcome. Re your questions: 1. The two p2b platforms that I use (TC and AC) don't use ratings although the documentation generally includes a credit score - which I pay little attention to unless it's bad. 2. Both platforms specialise in secured loans although the quality of security varies considerably, especially on TC, and one needs to be selective. I won't invest in a bad business even if the security looks good on paper, but I want some form of security even if the business looks great. By and large, p2b lenders are lending where the banks won't. So I try to figure out why the banks won't lend in a particular case, and whether it worries me. I've seen your comments re banks and wind turbines, which I found reassuring because I now have a better understanding of why they won't lend. I'm happy to take a portfolio view, and to rely on the insurance, which it seems banks can't or won't do. 3. My horizon is to the maturity of the loan, and often beyond. If a loan is to be repaid by a refinancing at maturity I have to be comfortable that the value will be there. I prefer loans with some amortisation to loans with none, because it reduces the refinancing risk considerably. 4. In general I feel that I am not kept well up to date, and this is the big disadvantage that a p2b lender has compared to a bank. A bank will (or should) have access to lots of up-to-date information about its customers and should have early warning systems in place to identify potential problems. For the most part, we have to trust the platforms and/or sponsors to be doing this on our behalf, and it's likely that some will do a better job than others.
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shimself
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Post by shimself on Sept 17, 2014 16:37:50 GMT
Seeing as you never had a default maybe you have some mates who might be interested in bringing deals in our direction please. Seriously what do BMW (whoever) pay nowadays?
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webwiz
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Post by webwiz on Sept 18, 2014 11:59:07 GMT
formertrader
said:
Personally I think that the best assets are :
1. Secured
2. Inflation-linked
3. Liquid
If you invest in a secure indexed-linked asset you are losing money (in purchasing power) by a factor equal to 45% (or whatever your marginal tax rate is) of the rate of inflation, per annum. If inflation averages 4% over the next 10 years that means a loss of about 20%.
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pikestaff
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Post by pikestaff on Sept 18, 2014 17:09:40 GMT
webwiz, inflation linked does not mean a return equal to inflation. It means a return linked to inflation. For example, I have index linked loans on TC promising: RPI + 7% pa (wind turbine) RPI + 10% pa (anaerobic digester) I also have some index-linked national savings certificates paying a great deal less (but tax free).
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webwiz
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Post by webwiz on Sept 19, 2014 16:47:18 GMT
webwiz, inflation linked does not mean a return equal to inflation. It means a return linked to inflation. For example, I have index linked loans on TC promising: RPI + 7% pa (wind turbine) RPI + 10% pa (anaerobic digester) I also have some index-linked national savings certificates paying a great deal less (but tax free). Fair point, but indexed linked pensions don't seem to comply with this interpretation.
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Post by bracknellboy on Sept 19, 2014 17:00:27 GMT
.... I also have some index-linked national savings certificates paying a great deal less (but tax free). uhh, yes. The days of RPI + 1.25% have gone. Something more like RPI + 0.0000000000000000005% (or as many leading zeros as their system is capable of handling). One case perhaps where 'Index Linked' DOES mean a "return equal to inflation" for all practical purposes......
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pikestaff
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Post by pikestaff on Sept 19, 2014 17:02:51 GMT
webwiz Actually they do but the fixed element is built in to the starting figures so you don't see it.
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angrysaveruk
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Post by angrysaveruk on Sept 20, 2014 20:08:55 GMT
the reason I invest in p2p is because it makes sense. Yes part of the return is from a bit more risk but a part of it is also cutting out the massive overheads of the banks both in terms of regulation and overheads. The way I see it if I experience large defaults on my heavily diversified consumer credit portfolios with zopa and ratesetter then the financial system will be so close to collapse that the government will probably be taking money out of low interest bank accounts like in Cyprus.
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james
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Post by james on Sept 26, 2014 1:37:13 GMT
1. Ratings: depends on the platform. I limit how much I'll invest until I have some evidence on which to base assessments of their performance. I don't mind a moderate amount of speculating if the returns look interesting.
2. Why: returns. At the moment I'm willing to take Euro-Pound currency risk and do unsecured lending to individuals to get a return of over 17% in Euros, assuming all 60 day late lending is lost. 11% in Pounds is less good but that's to be expected at the moment. I'm not willing to do P2P at only 5-10% because I can do better with VCTs. So far I haven't done secured lending to businesses via P2P but that'll happen sometime if I can see what looks like a good enough proposition.
3. I look at five or more years. I'm mainly investing for retirement then retirement income so one to three year time horizons don't matter so much to me.
4. Depends on the platform, reasonably.
I agree with you that secured, inflation-linked and liquid assets are best in quality but I don't necessarily agree that they are the best ones to invest in. Most of my own money is not in secured or inflation-linked investments, though most is very liquid.
There's one question that you didn't ask but should: do we trust the platforms overall? I know of one that so far I know to have broken the law between five and ten times in a loan to me and which I expect to repay almost all interest ever charged on the loan. I expect that platform to have to refund to borrowers around 20% of all interest ever charged.
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pikestaff
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Post by pikestaff on Sept 27, 2014 15:20:06 GMT
There's one question that you didn't ask but should: do we trust the platforms overall? I know of one that so far I know to have broken the law between five and ten times in a loan to me and which I expect to repay almost all interest ever charged on the loan. I expect that platform to have to refund to borrowers around 20% of all interest ever charged. You've posted more than once on this theme and I'm intrigued. I'm guessing (but could be wrong) that you are referring to breaches of the Consumer Credit Act. But does the Act apply? The Act will certainly apply in respect of consumer loans where the platform is not true p2p and the company running the platform is the lender of record (eg SS). But where the platform is true p2p, and loans are made by a syndicate of individuals, is that still the case and why? How can a platform be liable to repay interest that never belonged to it, and which it never received? Could individual lenders become liable, despite not being (or required to be) registered under the Act?
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james
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Post by james on Sept 27, 2014 18:25:35 GMT
The loans come with the standard Consumer Credit Act declarations, including things like early settlement values for the whole loan amount and Consumer Credit Act required annual statements for the loan as a whole, never for any pieces provided by individual lenders. In the P2x space it is the P2x firm that does all of the administration and has the main OFT and FCA registrations. If it breaks the law than it seems clear that it has been negligent and has liability to the lenders for any related losses that they might suffer. Particularly so when there are so many breaches to show that there is a pattern of not taking sufficient care to follow the law involved, not just a single incident.
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pikestaff
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Post by pikestaff on Sept 27, 2014 21:26:12 GMT
james I understand where you are coming from, but based on a quick scan of the Act all of the obligations are owed by the creditor to the debtor. And the platform is not the creditor, the lenders are. I have looked at the definition of 'creditor' in s189 and it does not, as far as I can see, extend the meaning of 'creditor' to include the creditor's agents (ie the platform). I may very well have missed something but it seems to me that, on the face of it, an aggrieved debtor would need to recover from the actual lenders, who would then have a claim in damages against the platform. There is no obvious basis that I can see for the debtor to claim back interest from the platform. Given the amortising structure of p2p consumer loans, it seems to me that there is no easy way for an aggrieved debtor to recover past interest from lenders. (With an interest-only loan, the debtor could simply withhold the interest from the final payment.) If you can provide chapter and verse as to why I am wrong, I would be very interested because it would change my risk assessment of consumer p2p platforms.
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james
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Post by james on Sept 28, 2014 2:13:24 GMT
The licensing of the platform will have included its obligations to comply with the law, with it doing that work and responsible for it. Absent that, I see no fundamental problem with a borrower naming every lender in a county court action and leaving the platform to sort out the mess it created by not dealing with the matter directly.
You should also consider that your argument implies, given that I'm not aware of even one case where a consumer lender has provided any annual statements to a consumer creditor. So what would you assert, that every lender on every P2P consumer loan has broken the law and gets taken to court individually for not providing any annual statements? And that all IVAs are invalid because no platform to my knowledge has ever passed on a proposed IVA settlement for creditor approval to the consumer lenders, while the platforms that voted without being creditors get prosecuted for that?
What clearly has happened is that every party involved, from borrowers through lenders and on to the Insolvency Service and the courts recognise the fundamental nature of what is happening and that the platform handles everything from finding the lenders through the legal compliance, including being the party with the Consumer Credit Act license/FCA permissions and related obligations.
If we do see the platform denying liability then I expect a mass wave of claims from people who took out a loan but received no annual statements for loan parts. As well as paradise for anyone who defaulted, since a loan is not enforceable when an annual statement is wrong.
Getting back to the original question from formertrader, there's a distinct lack of certainty in many aspects of P2x.
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pikestaff
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Post by pikestaff on Sept 28, 2014 6:23:22 GMT
The licensing of the platform will have included its obligations to comply with the law, with it doing that work and responsible for it. Absent that, I see no fundamental problem with a borrower naming every lender in a county court action and leaving the platform to sort out the mess it created by not dealing with the matter directly. You should also consider that your argument implies, given that I'm not aware of even one case where a consumer lender has provided any annual statements to a consumer creditor. So what would you assert, that every lender on every P2P consumer loan has broken the law and gets taken to court individually for not providing any annual statements? And that all IVAs are invalid because no platform to my knowledge has ever passed on a proposed IVA settlement for creditor approval to the consumer lenders, while the platforms that voted without being creditors get prosecuted for that? What clearly has happened is that every party involved, from borrowers through lenders and on to the Insolvency Service and the courts recognise the fundamental nature of what is happening and that the platform handles everything from finding the lenders through the legal compliance, including being the party with the Consumer Credit Act license/FCA permissions and related obligations. If we do see the platform denying liability then I expect a mass wave of claims from people who took out a loan but received no annual statements for loan parts. As well as paradise for anyone who defaulted, since a loan is not enforceable when an annual statement is wrong. Getting back to the original question from formertrader, there's a distinct lack of certainty in many aspects of P2x. The "fundamental nature of what is happening" is that the individual lenders, and not the platform, are making the loan. The platform is the lenders' agent and is appointed by the lenders to do all things on their behalf. So (for example) there is no issue with the platform agreeing to IVAs. Although the platform is the lenders' agent, I can't immediately see anything in the legislation that would enable the borrowers to sue anyone other than the lenders. Also, if you are relying on the lack of annual statements in order to reclaim your interest, I doubt that you have a case. The obligation to give (at least) annual statements is set out in s77A. Sub-section 77A(8) says "This section does not apply in relation to a non-commercial agreement or to a small agreement." A non-commercial agreement is defined in s189 as "a consumer credit agreement or a consumer hire agreement not made by the creditor or owner in the course of a business carried on by him". The vast majority of p2p lenders are not lending in the course of a business, so it seems to me that their loans are non-commercial agreements to which this requirement does not apply. And that's as it should be, IMO. One set of consumers lending to another should not get shafted on a technicality.
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Post by batchoy on Sept 28, 2014 8:17:29 GMT
The licensing of the platform will have included its obligations to comply with the law, with it doing that work and responsible for it. Absent that, I see no fundamental problem with a borrower naming every lender in a county court action and leaving the platform to sort out the mess it created by not dealing with the matter directly. You should also consider that your argument implies, given that I'm not aware of even one case where a consumer lender has provided any annual statements to a consumer creditor. So what would you assert, that every lender on every P2P consumer loan has broken the law and gets taken to court individually for not providing any annual statements? And that all IVAs are invalid because no platform to my knowledge has ever passed on a proposed IVA settlement for creditor approval to the consumer lenders, while the platforms that voted without being creditors get prosecuted for that? What clearly has happened is that every party involved, from borrowers through lenders and on to the Insolvency Service and the courts recognise the fundamental nature of what is happening and that the platform handles everything from finding the lenders through the legal compliance, including being the party with the Consumer Credit Act license/FCA permissions and related obligations. If we do see the platform denying liability then I expect a mass wave of claims from people who took out a loan but received no annual statements for loan parts. As well as paradise for anyone who defaulted, since a loan is not enforceable when an annual statement is wrong. Getting back to the original question from formertrader, there's a distinct lack of certainty in many aspects of P2x. The "fundamental nature of what is happening" is that the individual lenders, and not the platform, are making the loan. The platform is the lenders' agent and is appointed by the lenders to do all things on their behalf. So (for example) there is no issue with the platform agreeing to IVAs. Although the platform is the lenders' agent, I can't immediately see anything in the legislation that would enable the borrowers to sue anyone other than the lenders. Also, if you are relying on the lack of annual statements in order to reclaim your interest, I doubt that you have a case. The obligation to give (at least) annual statements is set out in s77A. Sub-section 77A(8) says "This section does not apply in relation to a non-commercial agreement or to a small agreement." A non-commercial agreement is defined in s189 as "a consumer credit agreement or a consumer hire agreement not made by the creditor or owner in the course of a business carried on by him". The vast majority of p2p lenders are not lending in the course of a business, so it seems to me that their loans are non-commercial agreements to which this requirement does not apply. And that's as it should be, IMO. One set of consumers lending to another should not get shafted on a technicality. For the most part I agree with you pikestaff, however whilst there are clear cut differences between the likes of SS and W&Co who are lenders seeking crowdfunding to fund their lending businesses and FC, AC, Bondora, and FK who are P2P platforms acting as agents on behalf of Lenders. The situation becomes less clear with the likes of Zopa and particularly so with Ratesetter where the relationship between the Lender and Borrower becomes less distinct with the platform taking more active roll in the lending process and the lender taking a passive roll.
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