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Post by schomosport on Dec 18, 2019 17:25:34 GMT
I write to share my default experience concerning a £20k investment in the FC ISA made in April 2019. My first experience of a default within this ISA (I also have a Classic account) was 16th September (£10.88). Since then, defaults have increased regularly and now total £553. In simple figures that's about 2.7% of my initial investment and if it continues linearly the default rate will be running at close on 11% per annum. Plus there is another £600 in the 'late' bin, a bin which FC seem only to ready to empty into the bad debt bin. I do understand some of the defaults may well come back over time as has been the case with my Classic account so the final tally may be better or worse. 'Over time' does of course mean months/years/never based on my experience with the Classic account over several years. As far as I am concerned on recent performance, late = bad debt, its gone.
I have now ceased lending and am pursuing a sell all and withdraw strategy. I do not expect to invest in FC or any other peer lending platform again.
This isn't intended as a whinge, appologies if it looks like one. it was an investment made in the knowledge of risk and if I make a loss I am fortunate enough to be able to cover it from other sources. Others may not be so fortunate and so I record my experience here for the benefit of others. I have also commented to FC regarding their loan selection criteria and their published default rates, I doubt it will make any difference.
A poorly received FC IPO, a sell time of months when it was once days and a haircut for sellers to try to entice new investment plus my direct expereince of defaualts tells me all I need to know regarding FCs future prospects.
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keitha
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Post by keitha on Dec 18, 2019 18:34:19 GMT
good on you
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p2pstephan
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Post by p2pstephan on Dec 19, 2019 10:50:00 GMT
What is your % profit?
I have similar ISA (Nov 2018) and it has 5.4% interest. 4.8% bad debt which is written off.
I agree Bad debt = Money gone and I believe this is not included in their calculation of % profit.
Late = Bad debt would make things not good and I hope this is not the case. I do not have stats on Late = Bad debt.
I have three FC accounts all make a profit. Two accounts I have removed the capital I put in and left the profit in. I am now exiting all my cash from FC. Seems to me the risk vs reward is not enough for my hard earned cash. Wish I could find a viable alternative. Hate to have it in the bank earning nowt.
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benaj
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Post by benaj on Dec 19, 2019 12:05:39 GMT
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corto
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Post by corto on Dec 19, 2019 13:01:23 GMT
I write to share my default experience concerning a £20k investment in the FC ISA made in April 2019. My first experience of a default within this ISA (I also have a Classic account) was 16th September (£10.88). Since then, defaults have increased regularly and now total £553. In simple figures that's about 2.7% of my initial investment and if it continues linearly the default rate will be running at close on 11% per annum. Plus there is another £600 in the 'late' bin, a bin which FC seem only to ready to empty into the bad debt bin. I do understand some of the defaults may well come back over time as has been the case with my Classic account so the final tally may be better or worse. 'Over time' does of course mean months/years/never based on my experience with the Classic account over several years. As far as I am concerned on recent performance, late = bad debt, its gone.
You report a surprisingly high default rate. I opened an account 04/18 and it needed 13 months to get to the same level of defaults as yours. I thought in 2019 they improved their DD standards. Maybe not? Does anybody else have numbers or observations? 11% pa defaults would indeed be a new high, almost twice their published *lifetime* default rate for loans until 2015 (see here lower right plot). Afterwards it got increasingly awkward .. They claim the projected annualised return and bad debt rate improved in 2019 (plots on the left). Does anybody have evidence for that? Given the curves 2016 forwards in the lower right plot, I have no clue how they can possibly justify the forecast in the upper left plot.
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Post by schomosport on Dec 19, 2019 14:29:43 GMT
QUOTE "You report a surprisingly high default rate. I opened an account 04/18 and it needed 13 months to get to the same level of defaults as yours. I thought in 2019 they improved their DD standards. Maybe not? Does anybody else have numbers or observations?" UNQUOTE
The below are my figures since 31st October:
Date Trapped Bad debt Sum
31/10/2019 887.34 171.35 1058.69
08/11/2019 793.54 223.01 1016.55
15/11/2019 843.98 263.86 1107.84
30/11/2019 816.59 386.14 1202.73
10/12/2019 756.95 463.83 1220.78
18/12/2019 594.02 553.00 1147.02
Trapped are loans I can't sell because they are late/processing of which the vast majority is 'late' Bad debt I call default. Maybe strictly speaking it isn't however for all practical purposes it is since all I expect to see back is recoveries which according to other posts on this forum may reach 50% but is more likely to be 20%.
Recent loan comments indicate a growing trend to move late borrowers to default borrowers. I have only just summed the two categories for my portfolio; interestingly the amounts are about the same suggesting a glut of late payers which FC have now decided are never going to pay. The tone of the comments indicate this.....Defaulting will also enable us to commence legal proceedings against the guarantor......
As of today balance and withdrawals amount to £20677.45 - profit £677.45 from which needs to be deducted up to £594.02 late and lets add on 50% of bad debt recovered (very optimistic) giving a total of £20360. That's a return of 1.8% over 8 months.
Maybe if I stop selling and resume lending I might get back into profit over time however that is not a risk I am prepared to take until/unless I see a marked reduction in late and defaulting borrowers. I have sold only 2% of the portfolio since 2nd December under the new selling regime so it looks like I will have plenty of time to sit around seeing how things are going to work out. 1.8% for 8 months is 2.7% for 9 months less 1.25% selling deduction makes it 1.45% overall. Doesn't compare too well with a fixed rate ISA which is much less risk.
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keitha
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Post by keitha on Dec 19, 2019 15:02:54 GMT
Since April I have 3.23% gone bad & 2.95% running late so pretty similar figures to yours except only , however Analysing this a little deeper only 1% of my April and later purchases have gone bad and 3% Running late so our late figures similar however your Bad Figures much worse than mine.
update at 21/12 Now gone to 4% bad and 2.25% late however the new bads 1 from this year 2 from last
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Post by kowalski on Dec 19, 2019 15:49:42 GMT
Reason I exited FC (eventually...) was that my bad debt was at 10% of the amount I had lent and it was growing meaning that the interest never covered the defaults. This is all black box investing. I am currently sitting on a debt recovery of 2.2%. At the moment I have a ‘profit’ of 1.3% so should have just stuck it in a savings account.
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KoR_Wraith
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Post by KoR_Wraith on Dec 19, 2019 15:56:16 GMT
Reason I exited FC (eventually...) was that my bad debt was at 10% of the amount I had lent and it was growing meaning that the interest never covered the defaults. This is all black box investing. I am currently sitting on a debt recovery of 2.2%. At the moment I have a ‘profit’ of 1.3% so should have just stuck it in a savings account. 2.2% recovery is very low, I'm sitting at 25% recovery, annualised returns of 7.1%. I'm expecting to eventually get 30-35% recovery. How representative this is of the loan book as a whole I do not know - I invested from 2013ish to 2015ish.
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Post by shanghaiscouse on Dec 19, 2019 16:05:20 GMT
If you invested up to 2016 then you are OK. It is the poor mugs who invested in 2018 who have taken the biggest hit as FC took steps (like removing the ability to choose which loans you participated in) to grow so fast to juice their IPO that they would be a bigger lender to SMEs than the combined UK banking sector. They threw money at anyone who could take it. 18 months ago I still had annualised returns above 7%, now I am down to 2.6% and I can see this easily coming down to zero as I have around 7% of my original loans left that could not be sold when I managed to sell just before the new system kicked in.
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corto
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Post by corto on Dec 19, 2019 16:30:12 GMT
Response to schomosport
Overall our numbers are not that different other than that your bad debt developed over a much shorter time frame than mine. 11% pa bad debt for you is likely a very pessimistic estimate. Most funds I got out by about June this year and didn't follow FCs policies closely since then. Possible, that as you write, they started to kill-off underperforming loans quicker than before. However, I had only one more loan put into bad debt since June out of about 15 that were not sellable at that time (when another 10 were already in bad debt). Most of the remaining ones seem to be serving payments now (would need to check the statements for definite numbers); several once very late ones have recovered, two are still late every month, but do pay in the end. I am slightly in the black numbers already and quite optimistic that the locked in loans will return at least a few more % in the end. Not what was suggested in the first place, but ok-ish, especially given that the money I got out on time is doing good and better controllable work elsewhere.
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corto
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Post by corto on Dec 19, 2019 16:35:23 GMT
If you invested up to 2016 then you are OK. It is the poor mugs who invested in 2018 who have taken the biggest hit as FC took steps (like removing the ability to choose which loans you participated in) to grow so fast to juice their IPO that they would be a bigger lender to SMEs than the combined UK banking sector. They threw money at anyone who could take it. 18 months ago I still had annualised returns above 7%, now I am down to 2.6% and I can see this easily coming down to zero as I have around 7% of my original loans left that could not be sold when I managed to sell just before the new system kicked in. Whereas I agree with the opinion, there is still the question: does FC default loans quicker now? schomosport seem to suggest that.
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Post by jamess on Dec 19, 2019 16:57:40 GMT
Opened my account 19/2/2015 Built it up to ~£18K Have gradually reduced it down to <£100 as I moved the fund into the IFISA during 2018.
In default ~£2,300 which is slowly trickling back.
Calculated interest rate 5.65% after defaults and fees. Total interest (profit) ~£2,800
My IFISA is also showing a profit of ~£1,150. I have tried to ensure that my loans are diversified.
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Post by nooneere on Dec 19, 2019 20:15:33 GMT
I have a 2017 FC IFISA and my current estimate of annualised return is 3.94%, assuming all 'Late' loans will turn into defaults. This % can only go down from here and I switched off reinvestment months ago, to just withdraw repayments and interest annuity-style.
The moral for me is that 3.94% is less than I'm earning from my relatively stress-free 2019 LP IFISA, and ditto for the AC QAA which will be my 2020 IFISA.
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Post by shanghaiscouse on Dec 31, 2019 10:55:02 GMT
I have around £23k left after an earlier sale, and have just tried to sell it, but it would only accept around £3k as the rest has a problem of one sort or another. I am now on course to have not only all my interest wiped out from day one (money that I have, of course, spent) but also capital. As for recoveries, of my lifetime bad debts of £40k, only £2.5k has been recovered.
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