dead-money
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Post by dead-money on Jul 28, 2019 17:54:58 GMT
Being reading some economics and game theory articles and came across the principal-agent problem regarding information asymmetry.
Do people believe or is there evidence that P2P Platforms have an unfair advantage over their lenders due to being the principal conduit for information.
Have P2P platforms misused, withheld or exploited the gap between the knowledge they have of a borrowers circumstances and the level of detail passed onto lenders and potential lenders?
Thoughts?
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r00lish67
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Post by r00lish67 on Jul 28, 2019 18:06:21 GMT
Being reading some economics and game theory articles and came across the principal-agent problem regarding information asymmetry.
Do people believe or is there evidence that P2P Platforms have an unfair advantage over their lenders due to being the principal conduit for information.
Have P2P platforms misused, withheld or exploited the gap between the knowledge they have of a borrowers circumstances and the level of detail passed onto lenders and potential lenders?
Thoughts?
Yes, undoubtedly. Without going into the many and various incriminatory specific cases, nearly all platforms which offer/have offered self-select are in a position of moral hazard. Why would agents be motivated to shine a light on unflattering aspects of a borrower's profile when to do would only dampen demand from lenders? In a recovery situation, why would agents not be tempted to kick the can down the road to avoid piling on huge losses to lenders and again dampening demand? In cases where the Agent has fouled something up spectacularly, why would they want to share all the information they have about this to their own detriment? It's basically the crux of nearly all of the woes on this entire board.
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Post by mrclondon on Jul 28, 2019 18:24:05 GMT
Yes, regularly and rountinely.
Just to take one simple case. Platforms often go out of their way to conceal who their borrowers are, and what other loans they have already taken, meaning lenders can end up being over exposed to a single borrower through multiple loans.
dead-money I can see you mainly post on the AC board. AC is unusual in providing the level of detail it does, but that hasn't always been the case, with many of their early loans completely anonymous.
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dead-money
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Post by dead-money on Jul 28, 2019 19:02:02 GMT
Yes, even with AC the level of detail doesn't seem to compensate for the advanced knowledge AC has of adverse events. Only AC can decide when to suspend or unsuspend a loan not the lenders.
So in many instances loans seem to go from being in good order with no negative information given straight to suspended indefinitely and the receivers called in!
You can't trade suspended loans in the MLA nor exit from them in the auto-select accounts GBBA / PSA. The auto-select accounts definitely seem to be a 'market for lemons' And increasingly the rates offered on MLA don't offer sufficient compensation for the unknown risks. (The known risks hopefully being priced into the headline interest rate)
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ozboy
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Post by ozboy on Jul 28, 2019 19:21:36 GMT
Being reading some economics and game theory articles and came across the principal-agent problem regarding information asymmetry.
Do people believe or is there evidence that P2P Platforms have an unfair advantage over their lenders due to being the principal conduit for information.
Have P2P platforms misused, withheld or exploited the gap between the knowledge they have of a borrowers circumstances and the level of detail passed onto lenders and potential lenders?
Thoughts?
Yes, undoubtedly. Without going into the many and various incriminatory specific cases, nearly all platforms which offer/have offered self-select are in a position of moral hazard. Why would agents be motivated to shine a light on unflattering aspects of a borrower's profile when to do would only dampen demand from lenders? In a recovery situation, why would agents not be tempted to kick the can down the road to avoid piling on huge losses to lenders and again dampening demand? In cases where the Agent has fouled something up spectacularly, why would they want to share all the information they have about this to their own detriment? It's basically the crux of nearly all of the woes on this entire board. FCA "Light Touch" = No Touch.
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Greenwood2
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Post by Greenwood2 on Jul 28, 2019 19:55:33 GMT
Being reading some economics and game theory articles and came across the principal-agent problem regarding information asymmetry.
Do people believe or is there evidence that P2P Platforms have an unfair advantage over their lenders due to being the principal conduit for information.
Have P2P platforms misused, withheld or exploited the gap between the knowledge they have of a borrowers circumstances and the level of detail passed onto lenders and potential lenders?
Thoughts?
Yes, undoubtedly. Without going into the many and various incriminatory specific cases, nearly all platforms which offer/have offered self-select are in a position of moral hazard. Why would agents be motivated to shine a light on unflattering aspects of a borrower's profile when to do would only dampen demand from lenders? In a recovery situation, why would agents not be tempted to kick the can down the road to avoid piling on huge losses to lenders and again dampening demand? In cases where the Agent has fouled something up spectacularly, why would they want to share all the information they have about this to their own detriment? It's basically the crux of nearly all of the woes on this entire board. That is also true for any investment product, the company selling the product is not going to highlight any potential downsides more than they legally have to.
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iRobot
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Post by iRobot on Jul 28, 2019 20:27:39 GMT
Yes, regularly and rountinely.
Just to take one simple case. Platforms often go out of their way to conceal who their borrowers are, and what other loans they have already taken, meaning lenders can end up being over exposed to a single borrower through multiple loans.
dead-money I can see you mainly post on the AC board. AC is unusual in providing the level of detail it does, but that hasn't always been the case, with many of their early loans completely anonymous. Indeed, and yet they are happy leaving in Tenancy details such as tenant names and individual monthly rental sums* for anyone with an account to see - fundingsecure 's Romford Rd loan. * if it were a single 'unit' then it'd be a little more necessary to disclose the rental income (or an approximation to broadly hide the precise figure), but here they could have been aggregated to protect what the tenants may consider private information.
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iRobot
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Post by iRobot on Jul 28, 2019 20:37:48 GMT
Being reading some economics and game theory articles and came across the principal-agent problem regarding information asymmetry.
Do people believe or is there evidence that P2P Platforms have an unfair advantage over their lenders due to being the principal conduit for information.
Have P2P platforms misused, withheld or exploited the gap between the knowledge they have of a borrowers circumstances and the level of detail passed onto lenders and potential lenders?
Thoughts?
Yes, undoubtedly. Without going into the many and various incriminatory specific cases, nearly all platforms which offer/have offered self-select are in a position of moral hazard. Why would agents be motivated to shine a light on unflattering aspects of a borrower's profile when to do would only dampen demand from lenders? In a recovery situation, why would agents not be tempted to kick the can down the road to avoid piling on huge losses to lenders and again dampening demand? In cases where the Agent has fouled something up spectacularly, why would they want to share all the information they have about this to their own detriment? It's basically the crux of nearly all of the woes on this entire board.Spot on r00. A strong constituent of the 'against' column re: SMs is that having one gives the impression that it isn't necessary to have all the information that should be made available to lenders. If there wasn't an SM and lenders only options were to hold to term or not invest, they wouldn't invest without that info and platforms would have no option but to provide it.
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Greenwood2
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Post by Greenwood2 on Jul 29, 2019 6:45:36 GMT
That is also true for any investment product, the company selling the product is not going to highlight any potential downsides more than they legally have to.
Not quite true in relation to the stockmarket though. Its a public open market and as such there are standards that need to be ahered to. Any assymetry of information would soon get identified because the regulatory monitoring is at a much higher level.
Everyone has access to the same data in the stockmarket. The only difference is the professionals have it all in one place thanks to Bloomberg et. al, whilst the retail investor has to go to 5 or 10 places on the internet. But its all there.
Anyone who still seriously believes insider trading on the stockmarket goes on in this day and age evidently doesn't work in the industry in this day and age (sure, like most crimes, there might be the occasional  bag out there, but nobody can seriously say insider trading is widespread ... those days are long gone and the remaiing occasional bag will get found out, sooner rather than later in this age of big data).
The stockmarket learnt its lessons over the years, and I am of the belief that P2P should have started from a 21st century stockmarket perspective instead of 16th century wild west.
Unfortunatley the FCA gave the P2P platforms and inch and they took a lightyear.
But companies on the stockmarket that might be in trouble often try to keep it quiet for as long as possible and companies can and do exaggerate profits, ie, Tesco 'creative' accounting, retail investors can easily be caught out there too. That's why I stick to trackers.
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Post by propman on Jul 29, 2019 9:37:28 GMT
Not quite true in relation to the stockmarket though. Its a public open market and as such there are standards that need to be ahered to. Any assymetry of information would soon get identified because the regulatory monitoring is at a much higher level.
Everyone has access to the same data in the stockmarket. The only difference is the professionals have it all in one place thanks to Bloomberg et. al, whilst the retail investor has to go to 5 or 10 places on the internet. But its all there.
Anyone who still seriously believes insider trading on the stockmarket goes on in this day and age evidently doesn't work in the industry in this day and age (sure, like most crimes, there might be the occasional bag out there, but nobody can seriously say insider trading is widespread ... those days are long gone and the remaiing occasional bag will get found out, sooner rather than later in this age of big data).
The stockmarket learnt its lessons over the years, and I am of the belief that P2P should have started from a 21st century stockmarket perspective instead of 16th century wild west.
Unfortunatley the FCA gave the P2P platforms and inch and they took a lightyear.
But companies on the stockmarket that might be in trouble often try to keep it quiet for as long as possible and companies can and do exaggerate profits, ie, Tesco 'creative' accounting, retail investors can easily be caught out there too. That's why I stick to trackers. Are you saying that there is assymetry between investors? If not, this is similar to the SE. I agree that there are stricter rules on disclosure by companies and that we have seen enforcement where these are not adhered to, it is this area that is the equivalent of Platform/ investors on self-select P2P, NOT insider trading.
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Post by martin44 on Jul 29, 2019 10:00:39 GMT
Being reading some economics and game theory articles and came across the principal-agent problem regarding information asymmetry.
Do people believe or is there evidence that P2P Platforms have an unfair advantage over their lenders due to being the principal conduit for information.
Have P2P platforms misused, withheld or exploited the gap between the knowledge they have of a borrowers circumstances and the level of detail passed onto lenders and potential lenders?
Thoughts?
My bold. I most certainly believe that their is an unfair (some might say purposefully misleading) relationship between the platforms and their valuers, without doubt there is increasing evidence across all platforms that the valuations placed on most (?) assets are massively inflated, thus leaving the LTV , supposedly 70% almost 100%+ of the real value of the asset. 
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dead-money
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Post by dead-money on Jul 29, 2019 10:25:36 GMT
Yep, I put zero weight on a valuation report, after all if it said the LTV wasn't there the loan would never get underwritten.
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ozboy
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Post by ozboy on Jul 29, 2019 11:27:03 GMT
Being reading some economics and game theory articles and came across the principal-agent problem regarding information asymmetry.
Do people believe or is there evidence that P2P Platforms have an unfair advantage over their lenders due to being the principal conduit for information.
Have P2P platforms misused, withheld or exploited the gap between the knowledge they have of a borrowers circumstances and the level of detail passed onto lenders and potential lenders?
Thoughts?
My bold. I most certainly believe that their is an unfair (some might say purposefully misleading) relationship between the platforms and their valuers, without doubt there is increasing evidence across all platforms that the valuations placed on most (?) assets are massively inflated, thus leaving the LTV , supposedly 70% almost 100%+ of the real value of the asset. Ha Ha, it wasn't considered a problem at all two and a half years ago, virtually everyone on here (bar one or two) pooh pooh-ed my consternation and didn't think The Great Valuations ConScam was a big deal. Oh how many regret that stance now. If you haven't already martin44 read through PBL157/PBL158 - R*****a & C****t, H****** Court Rd DEFAULT Meanwhile, The FCA sips their pink gins, when they're not asleep, and tells themselves what a wonderful job they're doing and how "Light Touch" is working just SO well with P2P.
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ozboy
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Post by ozboy on Jul 29, 2019 11:44:51 GMT
Do people believe or is there evidence that P2P Platforms have an unfair advantage over their lenders due to being the principal conduit for information.
Have P2P platforms misused, withheld or exploited the gap between the knowledge they have of a borrowers circumstances and the level of detail passed onto lenders and potential lenders?
Believe? We're long past the stage of politely allegedly believing my friend. 
The evidence is there. More on some platforms than others.
But on one platform I can think of, asymmetry of information is par for the course on 100% of loans. Not only for active lenders, but (perhaps even more seriously) completely blatant asymmetry of information in the secondary market (how are buyers meant to come to reasoned independent decisions regarding a secondary market if the platform is deliberatley and actively witholding any and all important prior information and facts which the platform and seller is aware of).
But in this wild west world of P2P the platforms can get away with it.
The trouble is that in P2P each platform is a law unto itself.
I would urge people to do what I've been doing. Quietly collating it and submitting it to the FCA in the hope that one day they accumulate sufficient hard evidence from sufficient unrelated people to put a boot firmly up the backside of the platforms.
No boots up backsides @wallstreet, The FCA and SFO needs to prosecute and jail people, and we all know on here who needs jailing.
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Post by dan1 on Jul 29, 2019 12:02:15 GMT
My bold. I most certainly believe that their is an unfair (some might say purposefully misleading) relationship between the platforms and their valuers, without doubt there is increasing evidence across all platforms that the valuations placed on most (?) assets are massively inflated, thus leaving the LTV , supposedly 70% almost 100%+ of the real value of the asset.
If you haven't already martin44 read through PBL157/PBL158 - R*****a & C****t, H****** Court Rd DEFAULT Meanwhile, The FCA sips their pink gins, when they're not asleep, and tells themselves what a wonderful job they're doing and how "Light Touch" is working just SO well with P2P. IMO your warnings, and those of other users, have not gone by the wayside. Sometimes it's not an easy message to get across when it appears that there are easy pickings (I always think back to the FS SM when their IFISA launched and the madness that ensued), when demand outstrips supply, and liquidity is excellent. You've taken plenty of flack but you've kept going, to your credit. Following the initial transfer of users taxable accounts to IFISA's the growth has slowed markedly. My guess is that the warnings from folk such as yourself have been a major contributor to that slow-down... just think you, by chance, see an ad (investing is child's play or whatever), enter the platform name into Bing/Google and start your research and you'll end up at TP, here, MSE forums etc. That's why there are such hard fought battles between investors on here, those looking to warn on one hand, and on the other those seeking to protect their locked in investments. It comes as no surprise the way the forum has evolved.
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bag out there, but nobody can seriously say insider trading is widespread ... those days are long gone and the remaiing occasional 
