aju
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Post by aju on Dec 3, 2019 18:11:40 GMT
RS has made a new entry today in the lenders notice board on FCA rule changes. You do have to be logged in for the link to work but the most interesting items I feel are .... and Be interesting to see some new things in raw data level I feel. Another interesting item could be ... Wonder what that one holds. |
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ashtondav
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Post by ashtondav on Dec 3, 2019 18:27:05 GMT
Hmmm, a lot of planning in the industry for "collapse".
Quite depressing talk in a new industry.
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Post by RateSetter on Dec 3, 2019 19:33:42 GMT
Good evening everyone. aju , you beat me to it! Here is the full RateSetter Notice: |
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aju
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Post by aju on Dec 3, 2019 23:53:02 GMT
Good evening everyone. aju , you beat me to it! Here is the full RateSetter Notice: sometimes i'm in front of the curve 
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benaj
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Post by benaj on Dec 10, 2019 7:55:28 GMT
Ratesetter emailed Notice of Changes yesterday.
The most positive thing about the wind down plan is the fee capped at 2% of the outstanding loan.
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Post by tom1 on Dec 10, 2019 9:03:13 GMT
Hmmm, a lot of planning in the industry for "collapse".
Quite depressing talk in a new industry.
I suppose I view it a bit differently - I like that they have made public a more detailed contingency plan. The alternative is that in the event that things go wrong, someone has to make things up as they go along, either as a complete outsider to the company or as a very stressed person inside an almost-ex company. These wind-up plans are like business continuity plans that (good) businesses make in order to be able to cope with foreseeable but hopefully unlikely events. It is a little irresponsible not to make such plans. Same as if you didn't have plans as a big business with external dependencies (for example an insurance company with potential claimants), for if a fire destroyed your main offices, what is the plan for continued delivery of your core business in the following days and weeks? (after the immediate and urgent part where you evacuate your staff and make sure they are safe) Hope for the best, plan for the worst.
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Post by fsbloke on Dec 16, 2019 15:54:07 GMT
The most important "change" has not been mentioned yet. Actually it is not "a change" per se but an obligation to be more transparent and honest about what the likely outcome will be in the event of administration. As I say, nothing has actually changed as such but the following may concentrate your collective minds....
When you "invest" in Ratesetter you are accepting the risk of borrower default. That's a known risk in that (a) it exists and (b) to some extent it can be reasonably forecast based on existing/industry data. RS offers enhanced protection in the form of their Provision Fund. When a single borrower defaults you'd generally be hard pushed to know much about it.
What is NOT discussed (anywhere near enough in my opinion) is the risk of the platform defaulting i.e what happens when/if RS winds up. The well documented failures in P2P have simply caused the FCA to up their game. A published & pre-financed Wind-down plan, greater transparency and reporting etc. All very reassuring no doubt but fundamentally nothing has actually changed. At the end of the day if an administrator cannot find sufficient company funds to meet the creditors demands then they will attempt (by court order if necessary) to reclassify investor funds (client money) and investor's loans as company assets and pay themselves and the other creditors from that. Companies don't go bust because they have plenty of cash/assets. The couple of P2P lenders I got involved with all talked about "ring fenced loans" and segregated cash - all references to that now seem to have disappeared. The new regulations now attempt to clarify what the position is (and was) ....
“It is possible that the administrator appointed may not be subject to the same regulatory regime and requirements as RateSetter. As a result, there is a possibility that any regulatory protections may be reduced or are no longer available”.
(a) “It is possible that the administrator appointed may not be subject to the same regulatory regime and requirements as RateSetter."
= RS are regulated by the FCA but in a winding down operation the administrator is not. He/she is governed by a whole load of different legislation (mostly the Insolvency Act I think). That's because they have a legal obligation to wind down the company and pay off the creditors (or as best they can) from whatever assets are available. Oh! and pay themselves handsomely for their services!
"As a result, there is a possibility that any regulatory protections may be reduced or are no longer available”.
=FCA protections probably will no longer apply. This puts client money and loans at risk despite previous assurances of segregated accounts and being ring-fenced inside a trust.
Of course this is true of ANY FCA approved provider that is not backed by the FSCS. That means all of P2P. Your greatest risk is if the provider goes bust.
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blender
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Post by blender on Dec 16, 2019 16:10:46 GMT
That is true but if the platform is providing a regulated service the administrators have to be acceptable to FCA. At Collateral the appointment by the platform of the (prepack) administrator was made void by the court on the application of the FCA, and FCA's chosen administrator was appointed. So FCA have some controls. Whether that has been good or bad for Coll lenders is for others to say.
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sl75
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Post by sl75 on Dec 16, 2019 16:20:41 GMT
... they will attempt (by court order if necessary) to reclassify investor funds (client money) and investor's loans as company assets and pay themselves and the other creditors from that... I think this is somewhat overstating the powers of the potential administrators.
It would seem analogous to an estate agent going bust, and the administrator going to court to try and have all the houses that were advertised for sale in their shop window "reclassified" as company assets.
... or a stockbroker going bust and the administrator "reclassifies" your shares as belonging to the stockbroker.
... or an operator of a self-storage unit going bust and the contents of those units being "reclassified" as belonging to the self-storage operator itself.
I am not a lawyer , but I understand there is a very clear legal difference between ones own property, and property that one is holding on behalf of someone else, and the client money rules etc. have as their very purpose to enforce this legal separation... but of course only WHEN FOLLOWED CORRECTLY (which may not be determined with absolute certainty until it's too late!)
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blender
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Post by blender on Dec 16, 2019 17:56:16 GMT
... they will attempt (by court order if necessary) to reclassify investor funds (client money) and investor's loans as company assets and pay themselves and the other creditors from that... I think this is somewhat overstating the powers of the potential administrators.
It would seem analogous to an estate agent going bust, and the administrator going to court to try and have all the houses that were advertised for sale in their shop window "reclassified" as company assets.
... or a stockbroker going bust and the administrator "reclassifies" your shares as belonging to the stockbroker.
... or an operator of a self-storage unit going bust and the contents of those units being "reclassified" as belonging to the self-storage operator itself.
I am not a lawyer , but I understand there is a very clear legal difference between ones own property, and property that one is holding on behalf of someone else, and the client money rules etc. have as their very purpose to enforce this legal separation... but of course only WHEN FOLLOWED CORRECTLY (which may not be determined with absolute certainty until it's too late!)
Agreed that p2p loans are not assets of the platform and lenders are not creditors of the platform, if properly set up. The problem is that the administrator serves the creditors, not the lenders. To obtain the payments from the borrowers and distribute it to the lenders is a service which can be charged for by the administrators. The alternative would be to just redistribute the company's liquidated assets to the creditors and to wash their hands of the loans, leaving the individual lenders to enforce their contracts with the individual borrowers. FCA would not like that. Only the administrators are in a position to handle or contract out the loan repayments and distribution, and presumably they can charge what they find necessary, as fees against the repayments.
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Post by fsbloke on Dec 19, 2019 4:49:12 GMT
"It would seem analogous to an estate agent going bust, and the administrator going to court to try and have all the houses that were advertised for sale in their shop window "reclassified" as company assets.
... or a stockbroker going bust and the administrator "reclassifies" your shares as belonging to the stockbroker.
... or an operator of a self-storage unit going bust and the contents of those units being "reclassified" as belonging to the self-storage operator itself.
"
Sl75, thanks for your reply and I understand where you are coming from. Like you I'm no lawyer.
Estate Agent: No! You have a contract with an agent to sell your house. You do not agree to transfer your title deeds to them. (Unless that's what it says and you didn't read it!)
Stockbroker: The FSCS offers compensation for this type of operation. The scheme would compensate you for any losses you incurred up to the current limit. Does not apply to P2P.
Selfstorage: To be honest no idea but I expect a contract is signed before depositing anything. The goods would remain the property of the owner except in the event of non-payment when they probably become "possession is 9/10ths of the law"!
"...but of course only WHEN FOLLOWED CORRECTLY (which may not be determined with absolute certainty until it's too late!)"
Your final comment is certainly relevant though because no investor has any idea how a company carries out its day to day operations. It may hide pertinent information or not disclose any illegal activity. The FCA's defence will almost certainly be along the lines "we can only regulate what is known" - whether that data is supplied via monthly returns, whistle-blowing or a full audit. By then it will be too late. Prosecutions may result but that is entirely a separate matter. Once in administration the business is protected from any legal action against it and you can bet your bottom dollar, by that stage, any available company assets will be minimal if any at all. The determination of that is obviously part of the IP duties. If they come up short then they have a legal duty to pursue all avenues. There's one year statutory to do that but they can apply for extensions. One I'm aware of is well into its third year. On counsel advice, if there is "an opportunity" by sequestrating lenders assets via legal argument then they will seek a court order to do so otherwise it will be liquidation. Lengthy & costly legal battles on top of lengthy and costly administrator's fees and no compensation for lenders. They say they represent the creditors. Pah! At the end of the day they only represent themselves IMHO. We all know that to be true!
The lawyers and the administrators will get the lion's share...in the name of the law!
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sydb
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Post by sydb on Dec 21, 2019 11:39:00 GMT
I think what people should be simply asking Ratesetter is, 'If the platform fails, how will lenders be better off than those with Lendy?'
Administrators charge fees; the less efficient they are, the more they can charge, and all completely 'within reason'. The more they subcontract (i.e. the less they do themselves), the higher the fees. The more incompetent they are, the more hours they charge for. These will not just be fees for chasing good and bad debt, there will be legal consultancy fees for covering their own arses, etc. They are quite likely to subcontract to another administrator for bad loans. By default, lenders will not be creditors of the P2P platform, and it is the creditors for whom the administrator of a 'collapsing' company are supposed to work on behalf of. By this reason alone, if there is anything at all legally questionable in the contract between the lender and agent regarding fees, or increased fees for longer delay in recovery, the administrator should not be the entity managing loans for the lenders as there is a blatant conflict of interest.
So how valid are all those wind down details after the company folds? Will the arrangements still be valid? Who will have any obligations to do what? Beware small print that also puts the platform fees above those of the lenders in any loan repayment.
fsbloke hit the nail on the head above. When a P2P company goes into administration, the rules are thrown up in the air, just at the time they are needed the most, and may not apply to the administrator. The government bailed out Northern Rock a few years ago. There will be no bail out in the P2P industry under current conditions.
The FCA rule changes look mostly guff to me. Self declarations from investors in a tick-the-box-to-lie online culture (Ts&Cs and EULAs that are often so large and incomprehensible that few have actually 'read and understood') and increased data exposure?? Come on, what about platform failure?
So, come on, why will none of this happen with Ratesetter? (I am not trying to have a go at Ratesetter. Historically, their operation is far more professional than the crooks at Lendy who, some might say, intentionally sought bad loans in order that they default to reap the default penalties at the expense of lenders' capital. However, the practical reality of platform failure should be a priority concern for all investing in P2P.)
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sydb
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Post by sydb on Dec 21, 2019 11:46:28 GMT
That is true but if the platform is providing a regulated service the administrators have to be acceptable to FCA. At Collateral the appointment by the platform of the (prepack) administrator was made void by the court on the application of the FCA, and FCA's chosen administrator was appointed. So FCA have some controls. Whether that has been good or bad for Coll lenders is for others to say. Adminstrators have rules. They work for creditors of the company gone into administration. Lenders are not creditors where loan contracts are directly between a lender and borrower (the P2P platform is just the agent). The FCA appear to be ineffective here and I would not advise anybody that they are doing much to protect consumers. These 'regulators' gave Lendy full FCA approval BECAUSE they had a remedial list for Lendy to perform, or so our new Bank of England governor spouted. There was little information made available or warnings given to clients and potential clients that Lendy was not up to scratch. In fact, people put more money in simply because of the FCA approval.
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sl75
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Post by sl75 on Dec 23, 2019 19:20:16 GMT
Sl75, thanks for your reply and I understand where you are coming from. Like you I'm no lawyer. Estate Agent: No! You have a contract with an agent to sell your house. You do not agree to transfer your title deeds to them. (Unless that's what it says and you didn't read it!) Stockbroker: The FSCS offers compensation for this type of operation. The scheme would compensate you for any losses you incurred up to the current limit. Does not apply to P2P. Selfstorage: To be honest no idea but I expect a contract is signed before depositing anything. The goods would remain the property of the owner except in the event of non-payment when they probably become "possession is 9/10ths of the law"! The point of those analogous situations was to highlight how ridiculous it was to suggest that one party's legally-owned assets/property could be "reclassified" as belonging to another party simply because the other party had entered administration and had some kind of contract with the first party to look after those assets.
Any such "reclassification" would surely be a form of theft.
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Post by fsbloke on Dec 24, 2019 6:38:23 GMT
With respect sl75 i will make this my last post on the matter as I'm not prepared to enter a lengthy discussion. If you don't get it then you don't get it. I posted this a while back on another forum as a tongue-in-cheek explaination to what goes on in certain legal situations.... "During the 1950s the famous criminal Willie Sutton was supposedly asked why he robbed banks, and his response was simple: "Because that's where the money is." Upon entering administration one of the first tasks for the IP is to establish a creditors committee. One of their first tasks is to approve how the creditors and the administration are going to get paid. They're not going to work for nothing. If the company has limited money/assets (highly likely) then they will, in the case of P2P, investigate the loan structures (trusts) and client money accounts of the investors to see if they can sequestrate those assets using legal argument. I don't want to repeat again all that I have written before. In other words they will go where the money is as per Willie Sutton. The IP has a duty to access all assets it legally can. That is not the same as they will get it, of course. That depends on what the platform has been up to. Their behaviour (which will be totally unknown to you) could seriously compromise trust status and client money making them both vulnerable. Why do you think the FCA has mandated those statements I quoted earlier? To make you aware what I am telling you is possible. If counsel advise there are no grounds then they won't pursue that course. However if there is a basis to challenge they will certainly apply for a court order. This isn't new stuff. Legalised theft? Yes of course. Still don't believe me?..... www.thisismoney.co.uk/money/investing/article-7750463/Lendy-investors-lose-loans-used-pay-creditors.htmlCheck out the difference between Money1 and Money2. Then maybe adjust your statement "The point of those analogous situations was to highlight how ridiculous it was to suggest that one party's legally-owned assets/property could be "reclassified" as belonging to another party"? No more from me. |
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