jane
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Post by jane on Oct 3, 2020 11:18:14 GMT
Just had my September statement from RS. If you bother to read the whole of it and scroll down far enough you will get to the 'Change to provision fund charge-off procedure' section. And on initial reading all seems good, it actually looks like we will get repaid on defaulting loans quicker now than before.
Then the sneaky bit arrives. It continues '
Read more in the RateSetter Notices section of your account.'. If you actually bother to log in to your account to read the extra information (a lot of people would not bother, i only happened to notice the full information because i logged in to cancel orders), then you will see the other side to this - that this change now means that you can get matched to loans that are already in default.
This probably does not make much difference to most of us on this board as most of us are cancelling our orders. But this does look like another deliberate attempt by RS to screw over the investors that are not aware of this work-around (and hopefully without them even finding out).
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ceejay
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Post by ceejay on Oct 3, 2020 12:32:03 GMT
In the RS model, whether a particular loan is in default isn't terribly relevant. If the platform is still afloat then you get repaid anyway, by the PF. And if/when the PF can't keep up, then all investors will take a hit together.
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Post by Badly Drawn Stickman on Oct 3, 2020 13:09:41 GMT
They actually posted that here yesterday. I was a little surprised it went unnoticed or at least commented on. I suspect it is related to the takeover as much as anything its mostly deckchair Titanic rearranging stuff at this stage of the game I would suggest. |
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Post by Ace on Oct 3, 2020 13:54:46 GMT
I too was very surprised that the notice wasn't commented on until now. I have so little left in RS now that I couldn't be bothered. However, as I have some free time on a very wet weekend...
I think the OP of this thread is wrong in saying "we will get repaid on defaulting loans quicker now than before". My understanding is that before this change we would have our capital repaid in full by the PF once a borrower missed 3 consecutive payments. After this change we continue to get interest payments from the PF until the original end date of the loan when the PF will finally return our capital.
It seems to me that this is a complete fudge to make the near time cash flow of the PF look better at the expense of putting extra strain on the PF later. This makes it better for those that manage to escape as it will give them a bit more time before capital haircuts are needed. This will make things much worse for those that don't escape as they will be left with higher debts, as the PF now needs to cover extra interest payments, and there will be fewer remainers to share the debts as it will allow more people to escape.
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star dust
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Post by star dust on Oct 3, 2020 14:23:52 GMT
I too was very surprised that the notice wasn't commented on until now. I have so little left in RS now that I couldn't be bothered. However, as I have some free time on a very wet weekend... I think the OP of this thread is wrong in saying "we will get repaid on defaulting loans quicker now than before". My understanding is that before this change we would have our capital repaid in full by the PF once a borrower missed 3 consecutive payments. After this change we continue to get interest payments from the PF until the original end date of the loan when the PF will finally return our capital. It seems to me that this is a complete fudge to make the near time cash flow of the PF look better at the expense of putting extra strain on the PF later. This makes it better for those that manage to escape as it will give them a bit more time before capital haircuts are needed. This will make things much worse for those that don't escape as they will be left with higher debts, as the PF now needs to cover extra interest payments, and there will be fewer remainers to share the debts as it will allow more people to escape. I came to the same conclusion myself. Having two QIF's I'm hoping (maybe against the odds) that the first might be a beneficiary of the change whilst feeling that the second definitely won't. Fortunately (?) my first QIF is for the larger amount of money and is currently paying back at the slowest rate. How it all comes out in the wash though who knows and neither am I likely to really know what the impact of the change was. I can't help feeling it's unfair for those much further down the RYI Q, or those not even in it though.
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jane
Posts: 145
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Post by jane on Oct 3, 2020 14:35:37 GMT
I too was very surprised that the notice wasn't commented on until now. I have so little left in RS now that I couldn't be bothered. However, as I have some free time on a very wet weekend... I think the OP of this thread is wrong in saying "we will get repaid on defaulting loans quicker now than before". My understanding is that before this change we would have our capital repaid in full by the PF once a borrower missed 3 consecutive payments. After this change we continue to get interest payments from the PF until the original end date of the loan when the PF will finally return our capital. It seems to me that this is a complete fudge to make the near time cash flow of the PF look better at the expense of putting extra strain on the PF later. This makes it better for those that manage to escape as it will give them a bit more time before capital haircuts are needed. This will make things much worse for those that don't escape as they will be left with higher debts, as the PF now needs to cover extra interest payments, and there will be fewer remainers to share the debts as it will allow more people to escape. Thought at the time that it was strange that RS would be doing something in our favour - i need to learn to read RS communications more slowly and process what they actually mean.
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adrian77
Member of DD Central
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Post by adrian77 on Oct 4, 2020 10:02:56 GMT
.
A very cogent and well-spotted point - thanks for pointing this out
Of course RS are more than welcome to refute your comments...
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Post by scepticalinvestor on Oct 7, 2020 13:05:41 GMT
I too was very surprised that the notice wasn't commented on until now. I have so little left in RS now that I couldn't be bothered. However, as I have some free time on a very wet weekend... I think the OP of this thread is wrong in saying "we will get repaid on defaulting loans quicker now than before". My understanding is that before this change we would have our capital repaid in full by the PF once a borrower missed 3 consecutive payments. After this change we continue to get interest payments from the PF until the original end date of the loan when the PF will finally return our capital.
It seems to me that this is a complete fudge to make the near time cash flow of the PF look better at the expense of putting extra strain on the PF later. This makes it better for those that manage to escape as it will give them a bit more time before capital haircuts are needed. This will make things much worse for those that don't escape as they will be left with higher debts, as the PF now needs to cover extra interest payments, and there will be fewer remainers to share the debts as it will allow more people to escape.
I apologise in advance if I'm completely off the mark, my knowledge of how the PF works is rudimentary at best. But is this how it will change?
Scenario - Loan of £1k with 24 months term remaining, paying interest of £5 a month, has missed the last 3 consecutive payments -
OLD SYSTEM - the PF repays £1k plus any missed payments until the date of default, case closed
NEW SYSTEM - the PF keeps paying £5/month interest to the lender for 24 months (£120 in total) followed by a capital repayment of £1k at the end of the 24 months.
Is that right?
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Post by Ace on Oct 7, 2020 13:14:40 GMT
I too was very surprised that the notice wasn't commented on until now. I have so little left in RS now that I couldn't be bothered. However, as I have some free time on a very wet weekend... I think the OP of this thread is wrong in saying "we will get repaid on defaulting loans quicker now than before". My understanding is that before this change we would have our capital repaid in full by the PF once a borrower missed 3 consecutive payments. After this change we continue to get interest payments from the PF until the original end date of the loan when the PF will finally return our capital.
It seems to me that this is a complete fudge to make the near time cash flow of the PF look better at the expense of putting extra strain on the PF later. This makes it better for those that manage to escape as it will give them a bit more time before capital haircuts are needed. This will make things much worse for those that don't escape as they will be left with higher debts, as the PF now needs to cover extra interest payments, and there will be fewer remainers to share the debts as it will allow more people to escape.
I apologise in advance if I'm completely off the mark, my knowledge of how the PF works is rudimentary at best. But is this how it will change?
Scenario - Loan of £1k with 24 months term remaining, paying interest of £5 a month, has missed the last 3 consecutive payments -
OLD SYSTEM - the PF repays £1k plus any missed payments until the date of default, case closed
NEW SYSTEM - the PF keeps paying £5/month interest to the lender for 24 months (£120 in total) followed by a capital repayment of £1k at the end of the 24 months.
Is that right?
I believe that's right, but only for consumer loans. There's no change to the other loan types.
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Greenwood2
Member of DD Central
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Post by Greenwood2 on Oct 7, 2020 14:01:14 GMT
I apologise in advance if I'm completely off the mark, my knowledge of how the PF works is rudimentary at best. But is this how it will change?
Scenario - Loan of £1k with 24 months term remaining, paying interest of £5 a month, has missed the last 3 consecutive payments -
OLD SYSTEM - the PF repays £1k plus any missed payments until the date of default, case closed
NEW SYSTEM - the PF keeps paying £5/month interest to the lender for 24 months (£120 in total) followed by a capital repayment of £1k at the end of the 24 months.
Is that right?
I believe that's right, but only for consumer loans. There's no change to the other loan types. The PF repays capital and interest as is it is due, I assume amortising loans will continue to pay capital as well as interest. From the recent statement: 'Investors will receive scheduled payments of capital and interest when they are due until the end of the loan’s term...'
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coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on Oct 7, 2020 16:10:12 GMT
So, is this a case of kicking the proverbial can down the road? It also begs questioning where the PF might be in 4+ years time!
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Post by Ace on Oct 7, 2020 16:46:19 GMT
So, is this a case of kicking the proverbial can down the road? It also begs questioning where the PF might be in 4+ years time! Very much so, and to the detriment of the unwary who will be picking up parts of a defaulted loan. With an even greater chance that the PF will be insufficient to repay when the loan ends due to the extra interest payments that it now needs to make.
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
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Post by beagle on Oct 7, 2020 20:46:38 GMT
So, is this a case of kicking the proverbial can down the road? It also begs questioning where the PF might be in 4+ years time! Very much so, and to the detriment of the unwary who will be picking up parts of a defaulted loan. With an even greater chance that the PF will be insufficient to repay when the loan ends due to the extra interest payments that it now needs to make. It doesn't really change anything just spreads the defaults and thereby enables RS more chance to collect it back vs just accepting the funds are gone
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Post by Badly Drawn Stickman on Oct 7, 2020 20:59:31 GMT
Very much so, and to the detriment of the unwary who will be picking up parts of a defaulted loan. With an even greater chance that the PF will be insufficient to repay when the loan ends due to the extra interest payments that it now needs to make. It doesn't really change anything just spreads the defaults and thereby enables RS more chance to collect it back vs just accepting the funds are gone I would agree it does not realistically alter the end game, but would suggest it funnels not spreads.
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wapping35
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Post by wapping35 on Oct 7, 2020 21:03:03 GMT
It does have a negative impact on the PF as RS acknowledge:
Quote:
What does this mean for the Provision Fund?
Following this change, the Provision Fund will cover extra interest (as it will cover all missed payments over the term of consumer loans, whereas previously the investor had their outstanding capital returned by the charge-off and no further interest was paid). This is expected to decrease the Interest Coverage Ratio by 3% and the Capital Coverage Ratio by 7%.
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Albeit in the near term cash flow will benefit within the PF since fewer large outstanding capital payments will have to be made.
EDIT: That 3% reduction equates to just over £1m .
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