sd2
Member of DD Central
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Post by sd2 on May 5, 2020 10:50:03 GMT
But this is not going to happen. Many companies will fail completely, and countless more companies
May I borrow your crystal balls?
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Post by inquiete on May 5, 2020 10:52:52 GMT
Thanks for that. Sorry to be a pedant but why do I sometimes see money in the Holding Account and then later in the day see that this is no longer there - presumably because it has been reinvested? Is this just the mechanics of the loan repayments? At the very least I assume I should be left with the interest on my loans rolling up in the holding account without this being reinvested - unless this was my reinvestment rate settings??
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coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on May 5, 2020 11:22:18 GMT
Not sure if this has already been covered as I don't have the time to wade through this mega thread but:
If it later turns out that RS overestimated its bad debt forecast, will investors' 'stolen' interest then be reimbursed?
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Post by lingield on May 5, 2020 11:49:55 GMT
No, the provision fund belongs to Ratesetter.
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ceejay
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Post by ceejay on May 5, 2020 11:52:37 GMT
Thanks for that. Sorry to be a pedant but why do I sometimes see money in the Holding Account and then later in the day see that this is no longer there - presumably because it has been reinvested? Is this just the mechanics of the loan repayments? At the very least I assume I should be left with the interest on my loans rolling up in the holding account without this being reinvested - unless this was my reinvestment rate settings?? The money appears briefly in your Holding Account because RS were too lazy to recode the system when the "Access" account was introduced. It was only there in a very notional way. But, yes, you should get some dribbles of interest and actual capital repayments building up in your holding account which will be relent at your set rate. If you put that high enough, it won't get lent out and you can cancel the order. Again, look at the transaction listing and attempt to get your head around all of the nonsense that appears there.
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sussexlender
Member of DD Central
Cheat seeking missile
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Post by sussexlender on May 5, 2020 12:08:11 GMT
I really have no idea how an interest rate hair cut gives any comfort that capital is safe. Reality is that it will be months before the full scale of the impact of COVID-19 on the health of the loan book will be known. How many of the businesses lent to are closed, how many have seen huge revenue declines, how many people lent to have lost their jobs, how many borrowers just decide that other bills should be prioritised? Maybe a lot will be fine, but at present it's way too early to make any predictions. Capital is never safe, but functioning PF gives some comfort. I absolutely agree - "Reality is that...at present it's way too early to make any predictions" The recent email from RS gives some insight into the Capital issue.Here is a section to assist in this thread (my bold for reference):- "The effect of the increase in Expected Future Credit Losses is that the Interest Coverage Ratio has gone below 100%. This means that while everyone’s capital remains fully protected (the Capital Coverage Ratio is 166%), not all future interest is. We are reducing interest, with the interest going to the Provision Fund, to bring the Interest Coverage Ratio back to 100%." With the current crisis developing it is hoped that the return of Capital at the very least is of some reassurance. SXLR
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Post by p2plender on May 5, 2020 12:15:17 GMT
I have all of my reinvestment settings set as high as possible - eg at 8% for access. It seems that money coming back from my borrowers (capital and interest) avoid passing through the holding account - or else pass through very rapidly - and are being lent out at rates far lower than my reinvestment settings. This situation gets worse I imagine after yesterday's rate cut announcement. Am i misunderstanding how the reinvestment settings work? I would have thought that setting these at the top of the rate range would have meant I would have access to all capital and interest repayments to be able to withdraw. Thanks! There's one thing for sure. RSs 'tweaking' over the last 12 months certainly has bamboozled many. Job done. Maybe more now wished they'd paid more attention to the various RS 'tweaks' which of course were manufactured by RS to make the whole investment experience 'more simple'....
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Post by Ace on May 5, 2020 14:24:39 GMT
I have all of my reinvestment settings set as high as possible - eg at 8% for access. It seems that money coming back from my borrowers (capital and interest) avoid passing through the holding account - or else pass through very rapidly - and are being lent out at rates far lower than my reinvestment settings. This situation gets worse I imagine after yesterday's rate cut announcement. Am i misunderstanding how the reinvestment settings work? I would have thought that setting these at the top of the rate range would have meant I would have access to all capital and interest repayments to be able to withdraw. Thanks! There's one thing for sure. RSs 'tweaking' over the last 12 months certainly has bamboozled many. Job done. Maybe more now wished they'd paid more attention to the various RS 'tweaks' which of course were manufactured by RS to make the whole investment experience 'more simple'.... To be fair it did make it much simpler. I.e. Don't add cash and don't reinvest. The only decision to make was whether to actively or passively withdraw.
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Post by james91 on May 5, 2020 14:24:42 GMT
If ratesetter went into administration - is anybody able to explain how it would work? For example, would their debt be paid out of our loan income? What kind of percentage with the administrators take etc? Did anyone have any experience with Lendy, and how this was managed? What percentage of your capital have you received to date?
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Post by havelhavelim on May 5, 2020 14:53:12 GMT
If ratesetter went into administration - is anybody able to explain how it would work? For example, would their debt be paid out of our loan income? What kind of percentage with the administrators take etc? Did anyone have any experience with Lendy, and how this was managed? What percentage of your capital have you received to date? Investors' money is ringfenced so if RS goes into administration or even bankrupt the loans we have made would not go to pay RS's debts.
I assume if there were large-scale fraud in the running of RS (think Bernie Madoff) then we would be in trouble.
Personally, all I can say that having started with P2P several years ago with Zopa, RS and Funding Circle, the only one I have continued to invest with is RS, and I currently have over £900K invested. Up to now, no capital or interest loss. What the future will bring, no idea!
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wuzimu
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Post by wuzimu on May 5, 2020 15:06:52 GMT
I think I mentioned this in an earlier post... But I doubt that RS will go into administration.
If the business proves unviable going forward in terms of new lending, (certinly possible if lender trust irrepariably damaged), then the existing loan book should be self financing to wind down. Although I suppose levies on lenders capital may come to pass as per the RS wind down plan in post above. I imagine the end game would be to sell a loanbook pf defaults to some debt collection co, resulting in a final capital loss for lenders. So the analogy is more akin to Moneything and some other platforms that are winding down.
Lendy, FundingSecure, Collateral administrations were down to unlawful activities by the platform that created libilities in those businesses that rendered them insolvent. Eventually the situation could no longer be hidden by the management. The timing of administration of those platforms was actually triggered by the FCA deciding they'd lost trust, had enough and FCA informed those businesses they were going to apply to Court to dissolve them. So FCA pushed Directors to appoint administrators.
In the case of RS, I do not see the sort of unlawful activity that may justify FCA intervention.
Of course RS may have a cashflow issue leading to insolvency, but that would be self inflicted as the loan book should be able to finance a wind down for some time.
IMO if the Covid situation eases soon RS may survive to lend again, even buy up others platforms loan book.
If the present situation persists for months RS is a self liquidating business that probably will lead to some capital loss for lenders - how much depends on the quality of the borrowers and lenders have been assured these are not sub-prime borrowers but people who could have got a bank loan. We;ll see.
Fingers x'd for the former.
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Post by df on May 5, 2020 15:24:24 GMT
If ratesetter went into administration - is anybody able to explain how it would work? For example, would their debt be paid out of our loan income? What kind of percentage with the administrators take etc? Did anyone have any experience with Lendy, and how this was managed? What percentage of your capital have you received to date? I've received about 8% of what was there at the start of administration, but others could receive more or less depending on their individual loan book. It's too early to say how it was managed, the period of administration was extended until 23rd May 2023. I don't think experience with Lendy can be an indication of how it would work if RS goes into administration. Different size, different type of loans and probably different administrators. I personally don't think that RS is likely to get to that stage, but I could be wrong.
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Post by shanghaiscouse on May 5, 2020 16:34:01 GMT
If ratesetter went into administration - is anybody able to explain how it would work? For example, would their debt be paid out of our loan income? What kind of percentage with the administrators take etc? Did anyone have any experience with Lendy, and how this was managed? What percentage of your capital have you received to date? Investors' money is ringfenced so if RS goes into administration or even bankrupt the loans we have made would not go to pay RS's debts.
I assume if there were large-scale fraud in the running of RS (think Bernie Madoff) then we would be in trouble.
Personally, all I can say that having started with P2P several years ago with Zopa, RS and Funding Circle, the only one I have continued to invest with is RS, and I currently have over £900K invested. Up to now, no capital or interest loss. What the future will bring, no idea!
I think the point is that although in an administration there is no technical reason why lenders would suffer additional losses, in actual fact if it happened the behaviour of borrowers would be highly unpredictable. I recall they have around £15m cash on the balance sheet now but also over £20m of loans. They had to have £12-15m a year every year of capital injections which has been used mainly to reduce debt, but there is still a lot of debt compared to profit. The would only go into administration if enough people pull money out fast enough so that their revenue falls, people pull money out because they are worried about real economy, a lot of genuine bad debt, but once administration is possible there will be a huge increase in bad debts as dodgy borrowers look to take advantage of the situation. We'd better hope that the FCA would get involved first and make sure there is a structured administration where they identify someone in advance willing to take on the book of loans and with the capability to do so. Over at funding circle the problem I see is they were swamped with defaults and they don't have an internal team that can handle it, so they put the debt collection out to agencies, but as it is all unsecured then its difficult and unrewarding for agencies to handle.
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aju
Member of DD Central
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Post by aju on May 5, 2020 16:53:55 GMT
Investors' money is ringfenced so if RS goes into administration or even bankrupt the loans we have made would not go to pay RS's debts.
I assume if there were large-scale fraud in the running of RS (think Bernie Madoff) then we would be in trouble.
Personally, all I can say that having started with P2P several years ago with Zopa, RS and Funding Circle, the only one I have continued to invest with is RS, and I currently have over £900K invested. Up to now, no capital or interest loss. What the future will bring, no idea!
I think the point is that although in an administration there is no technical reason why lenders would suffer additional losses, in actual fact if it happened the behaviour of borrowers would be highly unpredictable. I recall they have around £15m cash on the balance sheet now but also over £20m of loans. They had to have £12-15m a year every year of capital injections which has been used mainly to reduce debt, but there is still a lot of debt compared to profit. The would only go into administration if enough people pull money out fast enough so that their revenue falls, people pull money out because they are worried about real economy, a lot of genuine bad debt, but once administration is possible there will be a huge increase in bad debts as dodgy borrowers look to take advantage of the situation. We'd better hope that the FCA would get involved first and make sure there is a structured administration where they identify someone in advance willing to take on the book of loans and with the capability to do so. Over at funding circle the problem I see is they were swamped with defaults and they don't have an internal team that can handle it, so they put the debt collection out to agencies, but as it is all unsecured then its difficult and unrewarding for agencies to handle. The main concern for me would be that whilst the loans are ring fenced there would be costs for the administrators to manage this and I'd be surprised if this does not cost the lenders a percentage on the £1 that many may not be happy with. Just a thought.
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Post by lingield on May 5, 2020 16:59:28 GMT
I have not been able to figure out what happens to the margin (the difference between the amount paid by the borrowers and that paid to the investors) if Ratesetter goes under? Presumably, it is structured as a management fee and there might be some hope that this is no longer payable (as they would no longer be managing the portfolio). There is a reference to an admin fee of 2/2.5% in the T&Cs payable by investors in a wind down scenario but in some instances I suspect that Ratesetter's margin is significantly above this.
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