Unfair Terms & Lendy Administration
May 26, 2019 23:42:16 GMT
garfield, tony9239, and 1 more like this
Post by wuzimu on May 26, 2019 23:42:16 GMT
The Administration & Terms.
Early last week I started Lendy Action Group (LAG), as a pressure group for lenders who, like me had refused Lendy 'Enhanced' P2P terms which were introduced 05/03/18 and amended to the current version of 11/07/18.
Later in the week as we all know Liam threw in the towel. I see a fair number of posts pondering what this means for those interested in LAG and also having brought the terms issue into focus, what does the administration mean for different loans.
1. 'Model 1' terms, these are the non-P2P terms applying to loan prior to 2016 of which only DFL001/002, PBL027, PBL031 and PBL056 still remain on the platform.
I suspect the get-up is UCIS. That has its own consequences.
There is no direct contractual nexus between lenders and borrowers and this has led to speculation that lenders will be treated by RSM as unsecured creditors of Lendy (bad).
My opinion FWIW is that MAY be the case that RSM takes that view. BUT Clause 1.2 of the Model 1 terms describes that loans by lenders is for a specified purpose (ie to fund a secured loan) AND Clause 1.3 says that in the event of borrower default the security will be sold to repay the lenders of that loan.
In that case Lendy are still lenders fiduciary and even though the terms do not create a nexus between lenders and borrowers, they do create a contractual nexus between lenders and the security and a covenant that Lendy, in the event of default, must enforce the security for the benefit of lenders.
It will be obvious that lenders with model 1 loan parts (disclosure - I am one), very much need RSM to honour that covenant and obligation in trust. A lawyer would tell you that the correct interpretation is a matter of law for a Court to determine. I can tell you that in the first instance (and probably the last instance) it will be RSM in liaison with FCA who make that call. Lobbying RSM and FCA is important to make them hear we are watching and expecting fair play - LAG should do that.
2. 'Old P2P' terms. These apply to all loan up to 05/03/18 EXCLUDING the Model 1 loans above. There were up to 10 revisions in this period, but AFAICS of a minor nature.
I haven't scrutinized the whole loan portfolio to assign which loans to which terms. These terms are true P2P, the Loan Contract names the borrower and lenders as the parties. Lendy is our agent and Saving Stream Security Holding (SSSH) or security trustee. These loans are the majority of the Lendy loan book and the ONLY loans relevant to refusing 11/07/18 terms.
3. 'New P2P terms'. These apply to all loan after 05/03/18. These terms are true P2P, the Loan Contract names the borrower and lenders as the parties.
The main difference from 'Old P2P' loans is that New P2P terms ….
a. Create many new instances where Lendy can raise fees and charges as they like.
b. In the event of defaulted loans Lendy’s fees of whatever nature and ‘interest’ will be recovered first before lenders capital.
c. Lendy remove from themselves any obligation to manage loans or any obligation under the Loan Contracts and Lendy deny any liability for any information they present to lenders.
d. Lendy and Savingstream Security Holding Ltd irrevocably appoint themselves as agent / trustee over lenders and the loan contracts, meaning they cannot be removed.
The thread I wrote inviting interest in LAG explained why lenders might wish to refuse the ‘New P2P’ terms for any loan parts they had prior to 5/03/18.
IMO lenders should consider informing RSM of their refusal of 11/07/18 terms (or confirming it if you told Lendy). There are a number of reasons why. For instance if RSM decide to discharge their administration in a way that appears to largely drive up fees with little discernable recovery for lenders, I will consider terminating Lendy (in administration) as my agent and SSSH (in administration) as my security trustee. The ‘Old P2P’ terms allow that the ‘New P2P’ terms do not.
So there are a number of reasons why lenders should continue to inform the administrator the 11/07/18 terms are refused for loan parts in category 2.
These are my present thoughts on the administration, not legal advice. I hope to gather that in the next week or so.
Regards, Wuzimu
Early last week I started Lendy Action Group (LAG), as a pressure group for lenders who, like me had refused Lendy 'Enhanced' P2P terms which were introduced 05/03/18 and amended to the current version of 11/07/18.
Later in the week as we all know Liam threw in the towel. I see a fair number of posts pondering what this means for those interested in LAG and also having brought the terms issue into focus, what does the administration mean for different loans.
The answer must be that even RSM probably don't know yet what their position is, & we'll have to wait until they tell us.
RSM's opening notice at least informs us they are alive to the high appetite lenders will have for news of the fate of their savings.
That being said I have these comments about terms.
In my mind there are 3 categories of terms (as described in 2nd letter to FCA) and there ARE material differences between them.
1. 'Model 1' terms, these are the non-P2P terms applying to loan prior to 2016 of which only DFL001/002, PBL027, PBL031 and PBL056 still remain on the platform.
I suspect the get-up is UCIS. That has its own consequences.
There is no direct contractual nexus between lenders and borrowers and this has led to speculation that lenders will be treated by RSM as unsecured creditors of Lendy (bad).
My opinion FWIW is that MAY be the case that RSM takes that view. BUT Clause 1.2 of the Model 1 terms describes that loans by lenders is for a specified purpose (ie to fund a secured loan) AND Clause 1.3 says that in the event of borrower default the security will be sold to repay the lenders of that loan.
In that case Lendy are still lenders fiduciary and even though the terms do not create a nexus between lenders and borrowers, they do create a contractual nexus between lenders and the security and a covenant that Lendy, in the event of default, must enforce the security for the benefit of lenders.
It will be obvious that lenders with model 1 loan parts (disclosure - I am one), very much need RSM to honour that covenant and obligation in trust. A lawyer would tell you that the correct interpretation is a matter of law for a Court to determine. I can tell you that in the first instance (and probably the last instance) it will be RSM in liaison with FCA who make that call. Lobbying RSM and FCA is important to make them hear we are watching and expecting fair play - LAG should do that.
2. 'Old P2P' terms. These apply to all loan up to 05/03/18 EXCLUDING the Model 1 loans above. There were up to 10 revisions in this period, but AFAICS of a minor nature.
I haven't scrutinized the whole loan portfolio to assign which loans to which terms. These terms are true P2P, the Loan Contract names the borrower and lenders as the parties. Lendy is our agent and Saving Stream Security Holding (SSSH) or security trustee. These loans are the majority of the Lendy loan book and the ONLY loans relevant to refusing 11/07/18 terms.
3. 'New P2P terms'. These apply to all loan after 05/03/18. These terms are true P2P, the Loan Contract names the borrower and lenders as the parties.
The main difference from 'Old P2P' loans is that New P2P terms ….
a. Create many new instances where Lendy can raise fees and charges as they like.
b. In the event of defaulted loans Lendy’s fees of whatever nature and ‘interest’ will be recovered first before lenders capital.
c. Lendy remove from themselves any obligation to manage loans or any obligation under the Loan Contracts and Lendy deny any liability for any information they present to lenders.
d. Lendy and Savingstream Security Holding Ltd irrevocably appoint themselves as agent / trustee over lenders and the loan contracts, meaning they cannot be removed.
The thread I wrote inviting interest in LAG explained why lenders might wish to refuse the ‘New P2P’ terms for any loan parts they had prior to 5/03/18.
IMO lenders should consider informing RSM of their refusal of 11/07/18 terms (or confirming it if you told Lendy). There are a number of reasons why. For instance if RSM decide to discharge their administration in a way that appears to largely drive up fees with little discernable recovery for lenders, I will consider terminating Lendy (in administration) as my agent and SSSH (in administration) as my security trustee. The ‘Old P2P’ terms allow that the ‘New P2P’ terms do not.
Under the P2P terms, lenders are NOT creditors of Lendy by virtue of ownership of loan parts. Lendy is just the agent. Lenders only become creditors of Lendy if it can be shown (and RSM or a Court accept) that Lendy owe lenders a civil liability. It would be alot easier to do that if you have refused the 'New P2P' terms in favour of the 'Old P2P' terms.... A similar story for SSSH the security trustee.
So there are a number of reasons why lenders should continue to inform the administrator the 11/07/18 terms are refused for loan parts in category 2.
There is a separate job of lobbying to be done for Model 1 loans.
The administration is an opportunity for lenders to get some justice and money returned, be aware that the attitutude of RSM and FCA has wide bounds of descretion. Lenders need to be clear what they expect and why, that starts with refusing the 11/07/18 terms.
These are my present thoughts on the administration, not legal advice. I hope to gather that in the next week or so.
Regards, Wuzimu