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Post by stuartassetzcapital on Dec 28, 2019 11:50:50 GMT
I think I have answered this in detail above. Insolvency Law only applies to loan books of badly set up lenders such as Lendy and others who didn't do effective paperwork or did it on the cheap. We are only agent to the lender and the loans and income and security are all yours bar our disclosed monitoring fee that goes to us. Insolvency law cannot change that. Sometimes you have to be huge and well funded to do things properly and afford the right advice and afford the FCA experienced team members. Thats a somewhat odd statement. Im pretty sure Insolvency Law applies to all lenders. The big issue with Lendy is the application of the 'waterfall' when it comes to distributing recoveries. The Lendy waterfall being applied is exactly the same as the AC waterfall ... its written into the security charges for both platforms and thats what RSM are applying. The big difference is the level of fees being charged by Lendy and the application of default interest in Lendy's favour. Insolvency law hasnt changed it. Its not poor documentation, size, poor advice etc. (Quite a few loans on AC where that applies) Its a platform setup to make lots of money in an unsustainable way, ultimately in the interests of neither lenders or borrowers. What I mean is that insolvency law doesn't apply to the loan book in that way, it would apply to the P2P company but as we are merely agent to the lenders that is not an issue. With Lendy I understand a very large part of the loan book ran through their own balance sheet so under insolvency law of course lenders would lose out as all insolvency costs would be deducted before investors got a penny. That is not a legal P2P structure and is not how we are structured. So I fundamentally disagree that the Lendy waterfall is anything like ours. That is a fundamental and massive misunderstanding of the difference between correctly structured P2P and Lendy. The 'Fairer Growth for All' slogan has deep meaning for us and making 'lots of money in an unsustainable way' for shareholders to the detriment of other stakeholders is the antithesis of our purpose and a recipe for eventual disaster I agree wholeheartedly.
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ilmoro
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Post by ilmoro on Dec 28, 2019 11:53:33 GMT
It is not concerns about the stability of AC that are to the fore. It is the whole p to p industry which is wide open to every chancer about looking for rich pickings. The p to p major players as a whole could have done more and sooner to rein in the excesses exemplified by behaviours of Lendy, Funding Secure and Collateral managements. Presumably the FCA would have welcomed input whereas realistically the FCA is unable to service the whole financial services industry with concerns expressed from small investors unable to be given weight and perhaps credence. I take no comfort from 500+ loans available on the AC platform because if AC goes down, its wind-down plan may well go with it. I still do not know whether, in Administration, to a platform I am a creditor or an investor or both and I don't think our legislators know either. Some would prefer that Administrators simply sold on a loan book to another platform though how feasible this is I am not able to say. Currently the concept of ring-fencing rings hollow with Administrators regarding investors loans as eye-watering fair game. To myself as an insider it is all so simple but never explained well by people that know so here goes... To be clear you are only able to be a creditor in a P2P lending business AIUI, rather than having direct rights to the loan book and its security, if you have a poorly set up lending business. What that means practically is that if you have been lending / gifting money directly to a lending business such as how Lendy operated for a long time I understand, that makes you very exposed and makes them an illegal bank operating without a banking licence under FSMA 2000. That is what RSM walked into. It was public domain knowledge how they operated and I understand it was in the filed accounts and in the terms and conditions, its just no-one cared when offered 12% pa. Do you remember how investors who challenged the Lendy model and quality of lending were shot down by other forum members who wanted to carry on believing ? I can confirm categorically that we are a P2P lender, not a bank, fully authorised and correctly structured so that we are agent to the lender and that you are not a creditor of the firm, rather have full rights to the loans you have funded and all of their security. Anything else would not be legal without substantially different authorisations from the FCA or PRA. Our detailed wind down plan has cost a lot of money and is an extremely detailed document formed with RSM and runs to countless pages and is a complete operating manual and financial model of how this would run if ever needed. You will be pleased to know, as will our shareholders, that the plan has a surplus after all RSM management costs and without any need to take a penny from investors. Unlike some platforms' recent disclosures, we have not taken the option provided by the FCA to have an enlarged management fee deducted from the borrower loan repayments as with a £400m+ loan book and a sensible economic model we do not need that. I hope that helps but would welcome more questions that will get as robust and precise an answer as possible. Stuart, you are talking about how Lendy operated when it first launched up until late 2015 when the t&cs were changed for it to be article 36H compliant P2P lender. Lenders under the new structure (model 2) are not creditors of Lendy and that has been confirmed by RSM. The only lenders who are creditors of Lendy are the model 1 lenders who were lending directly to Lendy in four legacy loans. Lendy model was designed by top level financial & legal firms and was full compliant with FCA legislation of course as otherwise they wouldnt have ben authorised. 
Model 2 lenders are seeking to be creditors of Lendy for any shortfall on recoveries on the basis of misselling, false agency etc.
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Monetus
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Post by Monetus on Dec 28, 2019 12:02:10 GMT
To myself as an insider it is all so simple but never explained well by people that know so here goes... To be clear you are only able to be a creditor in a P2P lending business AIUI, rather than having direct rights to the loan book and its security, if you have a poorly set up lending business. What that means practically is that if you have been lending / gifting money directly to a lending business such as how Lendy operated for a long time I understand, that makes you very exposed and makes them an illegal bank operating without a banking licence under FSMA 2000. That is what RSM walked into. It was public domain knowledge how they operated and I understand it was in the filed accounts and in the terms and conditions, its just no-one cared when offered 12% pa. Do you remember how investors who challenged the Lendy model and quality of lending were shot down by other forum members who wanted to carry on believing ? I can confirm categorically that we are a P2P lender, not a bank, fully authorised and correctly structured so that we are agent to the lender and that you are not a creditor of the firm, rather have full rights to the loans you have funded and all of their security. Anything else would not be legal without substantially different authorisations from the FCA or PRA. Our detailed wind down plan has cost a lot of money and is an extremely detailed document formed with RSM and runs to countless pages and is a complete operating manual and financial model of how this would run if ever needed. You will be pleased to know, as will our shareholders, that the plan has a surplus after all RSM management costs and without any need to take a penny from investors. Unlike some platforms' recent disclosures, we have not taken the option provided by the FCA to have an enlarged management fee deducted from the borrower loan repayments as with a £400m+ loan book and a sensible economic model we do not need that. I hope that helps but would welcome more questions that will get as robust and precise an answer as possible. Stuart, you are talking about how Lendy operated when it first launched up until late 2015 when the t&cs were changed for it to be article 36H compliant P2P lender. Lenders under the new structure (model 2) are not creditors of Lendy and that has been confirmed by RSM. The only lenders who are creditors of Lendy are the model 1 lenders who were lending directly to Lendy in four legacy loans. Lendy model was designed by top level financial & legal firms and was full compliant with FCA legislation of course as otherwise they wouldnt have ben authorised.
Model 2 lenders are seeking to be creditors of Lendy for any shortfall on recoveries on the basis of misselling, false agency etc.
Yes Stuart you are referring to Model 1 loans (where investors were lending directly to Lendy and loans were on the balance sheet) which in hindsight was ridiculous. However this is a relatively small part of the loan book. Lendy changed their model in 2015 in order to be 36H compliant with Lendy acting as agent to investors and the vast bulk of the loan book was lent under this new structure. The new 36H model was signed off by Clarke Wilmott and Grant Thornton and received full FCA authorisation in July 2018. Furthermore, RSM were also employed as backup provider in a similar manner to yourselves and in a statement released upon their appointment in May when Lendy went into administration said: " RSM have previously reviewed the Companies’ systems as part of a stand by contingency planning service. Accordingly, RSM are well placed to facilitate an orderly wind-down of the book." Upon the insolvency of the platform the wind-down has been anything but orderly. I hope that would not be the case for Assetz...
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ilmoro
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Post by ilmoro on Dec 28, 2019 12:02:55 GMT
Thats a somewhat odd statement. Im pretty sure Insolvency Law applies to all lenders. The big issue with Lendy is the application of the 'waterfall' when it comes to distributing recoveries. The Lendy waterfall being applied is exactly the same as the AC waterfall ... its written into the security charges for both platforms and thats what RSM are applying. The big difference is the level of fees being charged by Lendy and the application of default interest in Lendy's favour. Insolvency law hasnt changed it. Its not poor documentation, size, poor advice etc. (Quite a few loans on AC where that applies) Its a platform setup to make lots of money in an unsustainable way, ultimately in the interests of neither lenders or borrowers. What I mean is that insolvency law doesn't apply to the loan book in that way, it would apply to the P2P company but as we are merely agent to the lenders that is not an issue. With Lendy I understand a very large part of the loan book ran through their own balance sheet so under insolvency law of course lenders would lose out as all insolvency costs would be deducted before investors got a penny. That is not a legal P2P structure and is not how we are structured. So I fundamentally disagree that the Lendy waterfall is anything like ours. That is a fundamental and massive misunderstanding of the difference between correctly structured P2P and Lendy. The 'Fairer Growth for All' slogan has deep meaning for us and making 'lots of money in an unsustainable way' for shareholders to the detriment of other stakeholders is the antithesis of our purpose and a recipe for eventual disaster I agree wholeheartedly. I think your understanding is incorrect or at least has not resulted in the scenario you describe. Only 4 loans are on Lendy's direct books, some £8m. All the other loans are ringfenced and not availiable to fund insolvency costs directly. Indirectly, however as I pointed out above, fees are flowing to Lendy via the management fee for managing the recoveries on behalf of the security agent (3%), outstanding monitoring fees over the life of the loans (c6%), default fees (up to 36%), exit fees (2%). All covered by the waterfall as per the security documents and all contained in the documentation which lenders never saw or at least, in the case of the public security charges, didnt know what to look for.
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Post by stuartassetzcapital on Dec 28, 2019 12:23:53 GMT
To myself as an insider it is all so simple but never explained well by people that know so here goes... To be clear you are only able to be a creditor in a P2P lending business AIUI, rather than having direct rights to the loan book and its security, if you have a poorly set up lending business. What that means practically is that if you have been lending / gifting money directly to a lending business such as how Lendy operated for a long time I understand, that makes you very exposed and makes them an illegal bank operating without a banking licence under FSMA 2000. That is what RSM walked into. It was public domain knowledge how they operated and I understand it was in the filed accounts and in the terms and conditions, its just no-one cared when offered 12% pa. Do you remember how investors who challenged the Lendy model and quality of lending were shot down by other forum members who wanted to carry on believing ? I can confirm categorically that we are a P2P lender, not a bank, fully authorised and correctly structured so that we are agent to the lender and that you are not a creditor of the firm, rather have full rights to the loans you have funded and all of their security. Anything else would not be legal without substantially different authorisations from the FCA or PRA. Our detailed wind down plan has cost a lot of money and is an extremely detailed document formed with RSM and runs to countless pages and is a complete operating manual and financial model of how this would run if ever needed. You will be pleased to know, as will our shareholders, that the plan has a surplus after all RSM management costs and without any need to take a penny from investors. Unlike some platforms' recent disclosures, we have not taken the option provided by the FCA to have an enlarged management fee deducted from the borrower loan repayments as with a £400m+ loan book and a sensible economic model we do not need that. I hope that helps but would welcome more questions that will get as robust and precise an answer as possible. Stuart, you are talking about how Lendy operated when it first launched up until late 2015 when the t&cs were changed for it to be article 36H compliant P2P lender. Lenders under the new structure (model 2) are not creditors of Lendy and that has been confirmed by RSM. The only lenders who are creditors of Lendy are the model 1 lenders who were lending directly to Lendy in four legacy loans. Lendy model was designed by top level financial & legal firms and was full compliant with FCA legislation of course as otherwise they wouldnt have ben authorised.
Model 2 lenders are seeking to be creditors of Lendy for any shortfall on recoveries on the basis of misselling, false agency etc.
Yes that is how I understand it re your first paragraph other than the scale of balance sheet lending in documents I have seen was way larger than 4 loans. Personally I don't see the need for lenders to need to be creditors in terms of any claims for misleading financial promotions, misselling or worse - standard law should cover that and cut through corporate protection for directors too. That's how it works.
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Post by stuartassetzcapital on Dec 28, 2019 12:25:56 GMT
Stuart, you are talking about how Lendy operated when it first launched up until late 2015 when the t&cs were changed for it to be article 36H compliant P2P lender. Lenders under the new structure (model 2) are not creditors of Lendy and that has been confirmed by RSM. The only lenders who are creditors of Lendy are the model 1 lenders who were lending directly to Lendy in four legacy loans. Lendy model was designed by top level financial & legal firms and was full compliant with FCA legislation of course as otherwise they wouldnt have ben authorised.
Model 2 lenders are seeking to be creditors of Lendy for any shortfall on recoveries on the basis of misselling, false agency etc.
Yes Stuart you are referring to Model 1 loans (where investors were lending directly to Lendy and loans were on the balance sheet) which in hindsight was ridiculous. However this is a relatively small part of the loan book. Lendy changed their model in 2015 in order to be 36H compliant with Lendy acting as agent to investors and the vast bulk of the loan book was lent under this new structure. The new 36H model was signed off by Clarke Wilmott and Grant Thornton and received full FCA authorisation in July 2018. Furthermore, RSM were also employed as backup provider in a similar manner to yourselves and in a statement released upon their appointment in May when Lendy went into administration said: " RSM have previously reviewed the Companies’ systems as part of a stand by contingency planning service. Accordingly, RSM are well placed to facilitate an orderly wind-down of the book." Upon the insolvency of the platform the wind-down has been anything but orderly. I hope that would not be the case for Assetz... The FCA now know that the previous wind down planning requirements were hopelessly inadequate and have introduced way more detailed requirements that went live on the 9th December this year. So your hope is well founded.
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ilmoro
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Post by ilmoro on Dec 28, 2019 12:26:42 GMT
Thats a somewhat odd statement. Im pretty sure Insolvency Law applies to all lenders. The big issue with Lendy is the application of the 'waterfall' when it comes to distributing recoveries. The Lendy waterfall being applied is exactly the same as the AC waterfall ... its written into the security charges for both platforms and thats what RSM are applying. The big difference is the level of fees being charged by Lendy and the application of default interest in Lendy's favour. Insolvency law hasnt changed it. Its not poor documentation, size, poor advice etc. (Quite a few loans on AC where that applies) Its a platform setup to make lots of money in an unsustainable way, ultimately in the interests of neither lenders or borrowers. So I fundamentally disagree that the Lendy waterfall is anything like ours. That is a fundamental and massive misunderstanding of the difference between correctly structured P2P and Lendy. Waterfall as being applied by RSM
1 . Firstly, towards the payment of the costs and expenses of Lendy, SSSHL and the investors in connection
with the enforcement of the security ("Costs Deduction");
2. Secondly, towards the payment of the Secured Liabilities, which are all the sums due to be paid by the
borrower(s) to Lendy and the investors in accordance with the contractual documentation ("Dividend
Apportionment");
3. Thirdly, in the event that there are sufficient realisations, in payment to the borrower.
Now the AC t&cs waterfall
Calculations made by the Assetz Agent and/or the Trustee of monies due to Lending Members will be made available on request by the Lending Member within 14 days of such request. Save as may be specified in any applicable intercreditor or priority document to the contrary, all monies arising from the enforcement of any Security Documents will be paid in the following order:
first, to meet any costs incurred in respect of any enforcement action by the Trustee and/or the Assetz Agent and/or by any other professional, manager, receiver or administrator appointed by either of them;
second, to meet the payment of any outstanding Fees or Servicing Income due to the Trustee and/or the Assetz Agent and any brokers or introducers in respect of the relevant Loan;
third, to repay the capital amount of each Micro Loan held by each Lending Syndicate Member on a proportional basis by reference to the percentage of the total number of Micro Loans held by each Lending Syndicate Member. This includes repayments to the Provision Fund of any capital losses of Lending Members already covered by it;
fourth, to repay to the Provision Fund any late interest payments that have been paid by the Provision Fund to the Lending Syndicate Members.
fifth, to pay any outstanding interest on the relevant Loan due to each Lending Syndicate Member on a proportional basis by reference to the percentage of the total number of Micro Loans held by each Lending Syndicate Member
In actual fact, the AC one is worse as all costs due to AC are paid first (no 2), ahead of lender capital, whereas under the RSM waterfall Lendy costs rank pari passu with all sums due to lenders. The original Lendy waterfall would have been worse but that has been superceded by Insolvency. Would the AC t&cs waterfall remain in place under Insolvency?
However, you seem to be missing the point. The issue isnt the waterfall, it is the level of payments due to Lendy. To AC's credit, the level of payments due to AC are miniscule in comparison.
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ilmoro
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Post by ilmoro on Dec 28, 2019 12:36:10 GMT
Stuart, you are talking about how Lendy operated when it first launched up until late 2015 when the t&cs were changed for it to be article 36H compliant P2P lender. Lenders under the new structure (model 2) are not creditors of Lendy and that has been confirmed by RSM. The only lenders who are creditors of Lendy are the model 1 lenders who were lending directly to Lendy in four legacy loans. Lendy model was designed by top level financial & legal firms and was full compliant with FCA legislation of course as otherwise they wouldnt have ben authorised.
Model 2 lenders are seeking to be creditors of Lendy for any shortfall on recoveries on the basis of misselling, false agency etc.
Yes that is how I understand it re your first paragraph other than the scale of balance sheet lending in documents I have seen was way larger than 4 loans. Personally I don't see the need for lenders to need to be creditors in terms of any claims for misleading financial promotions, misselling or worse - standard law should cover that and cut through corporate protection for directors too. That's how it works. It would have been more than 5 loans (not 4 as I originally said as I forgot one has been reclassified) but most of the loans have been resolved. If there is any other balance sheet lending it has not been defined as such by RSM (all sorts of anomalies but that is current position)
Standard law may well cover the claims but a successful case and financial renumeration awarded would have to be claimed from Lendy and thus lenders would be creditors for those sums. Being accepted as creditors for contingent liabilities is merely preempting the process.
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aju
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Post by aju on Dec 28, 2019 12:38:59 GMT
Okay so I'm just wandering through some of these discussions but this one caught my eye, I guess it was the AC mans comments, I was curious and also the title as I am in RS and Zopa and wondered why I would pull the plug if not for my own concerns regarding increasing Defaults in Zopa for us and having more recently dabbling with RS for the last year.
I know I am a relatively cautious P2Per, despite having probably higher sums in Zopa/RS than I should admit to but at least I've stuck largely to what I know or worse think I know and as many who have crossed my path will probably know i'm a beat inflation and a bit on top person rather than a hard core guy.
So Stuart from assetz has passed my view a few times lately, along with a few other new ones to me anyway and some who are blatantly looking for new punters. This thread and another did make me lookup assetz and on the face of it it looked like they might be one to have a closer look at.
Today though I looked at some recent threads in the AC board, largely because some of the well respected players started commenting here, and I'm glad I did as it does look like my kinda person should not be looking to AC as a new option after all. (Seems to have a few issues with defaults that I did not understand at first glance - gut kicks in usually at that point)
I'd like to say I am really grateful for the AC boards insights and discussions, I got a flavour of it from 3 recent threads, that all is not as rosy as it would seem over on the AC world (PF doesn't look as stable as they might, although to be fair I've never really relied on the PF funds from a head space point of view).
Anyway I see I am perhaps not as cynical as I should be after all. It is a gut feeling I know but its one that flashes up on my radar from time to time.
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Post by stuartassetzcapital on Dec 28, 2019 12:39:52 GMT
What I mean is that insolvency law doesn't apply to the loan book in that way, it would apply to the P2P company but as we are merely agent to the lenders that is not an issue. With Lendy I understand a very large part of the loan book ran through their own balance sheet so under insolvency law of course lenders would lose out as all insolvency costs would be deducted before investors got a penny. That is not a legal P2P structure and is not how we are structured. So I fundamentally disagree that the Lendy waterfall is anything like ours. That is a fundamental and massive misunderstanding of the difference between correctly structured P2P and Lendy. The 'Fairer Growth for All' slogan has deep meaning for us and making 'lots of money in an unsustainable way' for shareholders to the detriment of other stakeholders is the antithesis of our purpose and a recipe for eventual disaster I agree wholeheartedly. I think your understanding is incorrect or at least has not resulted in the scenario you describe. Only 4 loans are on Lendy's direct books, some £8m. All the other loans are ringfenced and not availiable to fund insolvency costs directly. Indirectly, however as I pointed out above, fees are flowing to Lendy via the management fee for managing the recoveries on behalf of the security agent (3%), outstanding monitoring fees over the life of the loans (c6%), default fees (up to 36%), exit fees (2%). All covered by the waterfall as per the security documents and all contained in the documentation which lenders never saw or at least, in the case of the public security charges, didnt know what to look for. Yes I agree their contracts were massively biased towards them and I think from what I read that lenders seemed to know and accept this at the time. Our costs are very modest by comparison with an average 1.35% monitoring income on the £400m loan book and only 1% of the default interest premium with the rest of the 4% going to lenders (see clause 10, point 7 in www.assetzcapital.co.uk/terms-and-conditions#fees-interest-and-capital-repayments).
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ilmoro
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Post by ilmoro on Dec 28, 2019 12:40:38 GMT
As I’ve said before I’ve not spent much time on observing Lendy as I’d dismissed it early on as no interest to me based on respected individuals on forums highlighting its dubious model. A cursory glance at it’s financial reporting would have confirmed those concerns. Year End 2017 had creditors of £195m and the 2016 had creditors of £172m and 2015 of £72m (after restatement). AIUI The bulk of creditors are not actually creditors of Lendy, nor are the debitors, it is the way the loan book was reported in the accounts and signed off by auditors.
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Post by stuartassetzcapital on Dec 28, 2019 12:42:35 GMT
As I’ve said before I’ve not spent much time on observing Lendy as I’d dismissed it early on as no interest to me based on respected individuals on forums highlighting its dubious model. A cursory glance at it’s financial reporting would have confirmed those concerns. Year End 2017 had creditors of £195m and the 2016 had creditors of £172m and 2015 of £72m (after restatement). Yes, £195m of creditors (lenders loaning money to Lendy) and slightly more as debtors (mostly borrower loans) is far more than the 4 loans stated above were funded from their balance sheet. That is the public source of my data too.
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Post by stuartassetzcapital on Dec 28, 2019 12:45:26 GMT
Yes that is how I understand it re your first paragraph other than the scale of balance sheet lending in documents I have seen was way larger than 4 loans. Personally I don't see the need for lenders to need to be creditors in terms of any claims for misleading financial promotions, misselling or worse - standard law should cover that and cut through corporate protection for directors too. That's how it works. It would have been more than 5 loans (not 4 as I originally said as I forgot one has been reclassified) but most of the loans have been resolved. If there is any other balance sheet lending it has not been defined as such by RSM (all sorts of anomalies but that is current position)
Standard law may well cover the claims but a successful case and financial renumeration awarded would have to be claimed from Lendy and thus lenders would be creditors for those sums. Being accepted as creditors for contingent liabilities is merely preempting the process.
Perhaps people haven't sought advice but claims may be brought wider than Lendy the company when misselling or worse has taken place and being a creditor isn't needed for that. It may well pierce the corporate veil. Not one for me to progress or advise on but worthy of checking.
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aju
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Post by aju on Dec 28, 2019 12:46:32 GMT
So is it time to pull the plug on P2P or not?, there are some big long posts on here but not sure if I should pull or not  |
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ilmoro
Member of DD Central
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Post by ilmoro on Dec 28, 2019 12:56:17 GMT
I think your understanding is incorrect or at least has not resulted in the scenario you describe. Only 4 loans are on Lendy's direct books, some £8m. All the other loans are ringfenced and not availiable to fund insolvency costs directly. Indirectly, however as I pointed out above, fees are flowing to Lendy via the management fee for managing the recoveries on behalf of the security agent (3%), outstanding monitoring fees over the life of the loans (c6%), default fees (up to 36%), exit fees (2%). All covered by the waterfall as per the security documents and all contained in the documentation which lenders never saw or at least, in the case of the public security charges, didnt know what to look for. Yes I agree their contracts were massively biased towards them and I think from what I read that lenders seemed to know and accept this at the time. Our costs are very modest by comparison with an average 1.35% monitoring income on the £400m loan book and only 1% of the default interest premium with the rest of the 4% going to lenders (see clause 10, point 7 in www.assetzcapital.co.uk/terms-and-conditions#fees-interest-and-capital-repayments). Lenders knew about the monitoring fees, they werent aware of the default interest. That was contained in the loan contracts which lenders didnt see. Several years ago there was a post on the forums quoting a Lendy email revealing default charges but the wider lender base would have been unaware and at the time it wasnt really relevant as Lendy had had less defaults than AC (around the time all those AC bridging loans went south ... three of which are still running! ... which appeared the better platform then?) As I said in my first post, the devils are in the detail. AC fees in the early days were visible in the CR as the total payments being made by borrowers were stated and the fees could be calculated by comparing with the actual repayment tab, then it became opaque. Now reappeared thanks to FCA disclosure rules.
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