Greenwood2
Member of DD Central
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Post by Greenwood2 on Jan 6, 2020 7:46:19 GMT
What have you encountered, or didn't expect in a platform wind-down plans, in administration, or in liquidation that you didn't expect, foresee, or understand, or has come out in the wash, or was hidden in the small print? eg in COL, Ly, MT, TC or others, where there was a plan in place, but eventually the lender is less advantaged than one was lead to believe? Platforms advertise wind-down plans as a significant backup to platform failure (whatever the cause). However, it seems that things aren't that straightforward - e.g. procedure can be in place which still could advantage the platform owners. ... - There is complete legal ambiguity of the position of lenders in the event of an administration. ... Worse there seems to be complete legal ambiguity as to the position of lenders in relation to platforms and borrowers generally, that becomes more obvious in platform administration. For platforms: mostly we aren't consumers because we pay nothing (the borrower is the consumer) we aren't investors as we have no stake in the platform, we aren't directly creditors of the platform we haven't usually lent the platform anything. In theory the borrowers owe us money but with most platforms we have no control of the management of loans or recoveries this is done by the platform (and then the administrators). Lenders seem to have a very nebulous relationship with everyone, which seems to be able to be twisted to suit everyone but lenders.
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Post by propman on Jan 22, 2020 10:35:53 GMT
I have no direct personal experience in the P2P wind downs. However I have worked on a number of liquidations on all sides (banks, administrators and creditors) although my involvement is only in one area.
Administrators and liquidators are required to maximise the funds payable to those appointing them (creditors and shareholders - limited to the amounts due to creditors). This means that they challenge how things have operated. My understanding is that in the P2P cases they have established that the loans were actually due to the companies running the platforms who then had an obligation to lenders. As I understand it, Aricle 36H loans need to be due to the investors. If this is done correctly, then the funds paid by the borrowers are due to the lenders. However, the P2P platforms have an arrangement with the lenders to manage these contracts and the right to deduct certain fees from them. Most platforms have a wide discretion under their rules to increase these fees at least in certain circumstances. As a result, if the costs of recovery exceed the fees expected, we can expect the fees to reduce the portion of the borrowers payments made to the lenders. In addition, on continuing platforms we do not know whether a liquidator or administrator might be able to show that the contracts were actually not 36H compliant and so turning the loans into debts due to the platform provider. In that case, these payments will be used to meet all costs of the liquidation/ administration and lenders will only receive the same proportion of the amounts due as otrher direct creditors of these providers. The best lenders could achieve in these circumstances is damages for the failure if they represented that the loans were compliant, These would be expensive to obtain (ie require a legal case) and would only be paid as another creditor and so little might be forthcoming.
- PM
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