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Post by chris on Jul 9, 2015 20:56:27 GMT
Some of this is also misunderstanding of what the interest buffers are and what they're for. There's been a fundamental disconnect between how lenders have interpreted what is meant by an interest buffer and what the credit / monitoring team have meant by it with them coming from the banking world. Lenders talk about the interest buffer being part of the security of the loan and as belonging to the lenders, for example, whereas legally the funds belong to the borrower and, as I understand it, were meant to be used to smooth any blips in borrower cashflow not as additional security.
Had we been more transparent on the current balances in the buffers and when they were being used to make lender payments then this would have been caught much earlier. The simple fact is that the credit team didn't have any tools for doing so on site, rather than them wanting to bury bad news or anything underhand, and because of how they're used by banks it just didn't occur to them to ask me to implement something.
To help solve this an education piece is being put together by the content team to detail what interest buffers are and how they're used. I'm also personally heading up the incorporation of all credit and monitoring functions into our CRM system and then exposing as much of that activity and data as we possibly can to lenders via the website. This is a big job that will take a couple of months to fully roll out so please bear with us whilst we put everything in place to make sure our communication on this is first rate on all fronts.
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jonah
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Post by jonah on Jul 9, 2015 21:15:23 GMT
I for one hadn't understood the buffer in the way you suggested chris so look forward to learning more. I do hope that this is carefully presented and phrased though as I can see a number of quite unhappy folk if they believe they are 'losing ' what they thought they had in terms of security. |
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ilmoro
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Post by ilmoro on Jul 9, 2015 23:31:29 GMT
Some of this is also misunderstanding of what the interest buffers are and what they're for. There's been a fundamental disconnect between how lenders have interpreted what is meant by an interest buffer and what the credit / monitoring team have meant by it with them coming from the banking world. Lenders talk about the interest buffer being part of the security of the loan and as belonging to the lenders, for example, whereas legally the funds belong to the borrower and, as I understand it, were meant to be used to smooth any blips in borrower cashflow not as additional security. Had we been more transparent on the current balances in the buffers and when they were being used to make lender payments then this would have been caught much earlier. The simple fact is that the credit team didn't have any tools for doing so on site, rather than them wanting to bury bad news or anything underhand, and because of how they're used by banks it just didn't occur to them to ask me to implement something. To help solve this an education piece is being put together by the content team to detail what interest buffers are and how they're used. I'm also personally heading up the incorporation of all credit and monitoring functions into our CRM system and then exposing as much of that activity and data as we possibly can to lenders via the website. This is a big job that will take a couple of months to fully roll out so please bear with us whilst we put everything in place to make sure our communication on this is first rate on all fronts. Thanks chris. I think once again it all comes down to communication. Ive just looked at E**** & NLCPL CR and in both cases the buffer is clearly referred to within sections referring to security eg. in the latter security is listed as 1st charge; 2nd charge; company guarentees, PG, 3 month interest buffer so it is very hard for lenders to draw any other conclusion. This is something that probably needs to be considered in your review/changes
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Post by drstarter33 on Jul 9, 2015 23:54:36 GMT
I don’t doubt AC’s integrity for one moment but I’m beginning to wonder about the level of competence within the organisation. To err is human but too many errors have come to light of late. I agree. I am not impressed by the N. London Commercial saga and still waiting for 'internal review' to come up with a solution for this mis-sold loan. I am now in the process of withdrawing slowly from AC - as I am genuinely worried about the accuracy of information I was given for other loans as well. It looks like they 'come to know' of problems only after something goes wrong - in this case, 3 months after it started going wrong.
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Post by jevans4949 on Jul 10, 2015 6:08:44 GMT
I am wondering if interest buffers are of much value to AC's lenders. Most of us aren't depending on the day-to-day cash-flow from our investment. We are more concerned about the reliable performance of the borrower's business. In the cases that are being raised, (especially NLCP). the interest buffer has effectively been "hiding" problems. Interest buffers are being "sold" in credit reports as contributing towards security, so their non-maintenance does have an impact.
From the borrower's point of view, the buffer is dead money; it is increasing his overall indebtedness to no good effect.
It would probably be preferable to have no interest buffer, but instead have some form of performance indicator on the loan, indicating the average number of working days that repayments have been received late, or early. Maybe with some sort of weighting towards the most recent 3 months' repayments, so that we can see that a past problem has been overcome, or a new problem may be rising.
There might also be a case for loans with flexible repayment instalments, and interest calculated on a daily basis, which would be helpful for seasonal businesses. I would rather see an indication that the borrower was doing better than expected, and be able to make more loans elsewhere.
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Mike
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Post by Mike on Jul 10, 2015 6:59:52 GMT
Yes - I think lenders may find it difficult to distinguish between loan payments, principle outstanding and the quite separate issue of the buffer which I don't think one can consider in the same light. There are repayments which have to be made and the buffer is there to help if need be; as stated above the money in the buffer is in excess of the loan repayments I don't see how this could be considered as a material security. The only security it brings is as a buffer - which is non-zero but even if it was taken to be as cash held as security against an outstanding debt (!!) then it's such a small amount I really cannot understand the issue in this regard. If the borrower is unable to service the loan he can take comfort in the buffer and not worry about default as the loan repayments can still be made, if I were a borrower I would worry much less about missed payments as I hope is the case in some of the recent issues.
The lack of repayment should be seen as less significant by both borrower and lender if a sufficient buffer has been previously built up to cover it and avoid default in my own view.
Many of the posts appear to have quite a different understanding of the English word 'buffer' to me.
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unmadem
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Post by unmadem on Jul 10, 2015 8:48:03 GMT
I don't think it matters too much if there are different interpretation as to the purpose of the buffer between different lender, though obviously AC publishing their official view is welcome. What has deeply troubled me is that
So publishing the value for any buffer on the web site and making it clear by putting an entry in the activity log when it has to be used to cover a payment is a priority for me. It would be great if AC always got every thing right but at least if the figure is published we can act as an extra layer of due diligence.
chris I'd imaging that integration with CRM is rather complicated and time consuming. I would really like something quickly and it would be good for AC to get a quick win. Why not, in the short term, just add the buffer figure to covenant monitoring documents and have admin change them when appropriate. Not all loans have a buffer so it shouldn't be too onerous to maintain then while IT are working on a fully integrated system.
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Post by Duane Dibley on Jul 10, 2015 10:00:11 GMT
Some of this is also misunderstanding of what the interest buffers are and what they're for. There's been a fundamental disconnect between how lenders have interpreted what is meant by an interest buffer and what the credit / monitoring team have meant by it with them coming from the banking world. Lenders talk about the interest buffer being part of the security of the loan and as belonging to the lenders, for example, whereas legally the funds belong to the borrower and, as I understand it, were meant to be used to smooth any blips in borrower cashflow not as additional security. Had we been more transparent on the current balances in the buffers and when they were being used to make lender payments then this would have been caught much earlier. The simple fact is that the credit team didn't have any tools for doing so on site, rather than them wanting to bury bad news or anything underhand, and because of how they're used by banks it just didn't occur to them to ask me to implement something. To help solve this an education piece is being put together by the content team to detail what interest buffers are and how they're used. I'm also personally heading up the incorporation of all credit and monitoring functions into our CRM system and then exposing as much of that activity and data as we possibly can to lenders via the website. This is a big job that will take a couple of months to fully roll out so please bear with us whilst we put everything in place to make sure our communication on this is first rate on all fronts. I think most lenders fully understand the reasons for a buffer and under what circumstances they will be used. It isn't the fact that the buffer was being used, it's the fact that we weren't told it was being used and that it wasn't being replenished. Especially after the issues with Leeds Commercial when we were categorically assured both on this forum and in the Q&A's that there were no other loans in a similar situation.
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merlin
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Post by merlin on Jul 10, 2015 14:15:01 GMT
Some of this is also misunderstanding of what the interest buffers are and what they're for. There's been a fundamental disconnect between how lenders have interpreted what is meant by an interest buffer and what the credit / monitoring team have meant by it with them coming from the banking world. Lenders talk about the interest buffer being part of the security of the loan and as belonging to the lenders, for example, whereas legally the funds belong to the borrower and, as I understand it, were meant to be used to smooth any blips in borrower cashflow not as additional security. Had we been more transparent on the current balances in the buffers and when they were being used to make lender payments then this would have been caught much earlier. The simple fact is that the credit team didn't have any tools for doing so on site, rather than them wanting to bury bad news or anything underhand, and because of how they're used by banks it just didn't occur to them to ask me to implement something. To help solve this an education piece is being put together by the content team to detail what interest buffers are and how they're used. I'm also personally heading up the incorporation of all credit and monitoring functions into our CRM system and then exposing as much of that activity and data as we possibly can to lenders via the website. This is a big job that will take a couple of months to fully roll out so please bear with us whilst we put everything in place to make sure our communication on this is first rate on all fronts. I think most lenders fully understand the reasons for a buffer and under what circumstances they will be used. It isn't the fact that the buffer was being used, it's the fact that we weren't told it was being used and that it wasn't being replenished. Especially after the issues with Leeds Commercial when we were categorically assured both on this forum and in the Q&A's that there were no other loans in a similar situation. This is not so much being economical with the truth but more a case of being economical with the facts. So whilst AC seem to be quite verbose in their replies to questions that are relatively easy to answer when it comes to a situation like L**ds Commercial and other buffer problems that have come to light since, they become reticent to answer. There are probably several reasons for this and for AC as a new business, a general reluctance to reveal bad news for fear of tuning off investors. However as we all know, eventually the information will get out and then it can do more damage than having come clean at an early stage. It is then that the issues of trust, honesty, etc. tend to get banded around. All very bad for a business trying to grow.
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Post by chris on Jul 10, 2015 14:44:47 GMT
I think most lenders fully understand the reasons for a buffer and under what circumstances they will be used. It isn't the fact that the buffer was being used, it's the fact that we weren't told it was being used and that it wasn't being replenished. Especially after the issues with Leeds Commercial when we were categorically assured both on this forum and in the Q&A's that there were no other loans in a similar situation. This is not so much being economical with the truth but more a case of being economical with the facts. So whilst AC seem to be quite verbose in their replies to questions that are relatively easy to answer when it comes to a situation like L**ds Commercial and other buffer problems that have come to light since, they become reticent to answer. There are probably several reasons for this and for AC as a new business, a general reluctance to reveal bad news for fear of tuning off investors. However as we all know, eventually the information will get out and then it can do more damage than having come clean at an early stage. It is then that the issues of trust, honesty, etc. tend to get banded around. All very bad for a business trying to grow. As I stated in my previous post we are committed to transparency and will be ensuring solutions are coded that give you absolutely every bit of relevant information we have. By this time next week every loan with an interest buffer will have the current value of the buffer displayed against it.
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shimself
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Post by shimself on Jul 10, 2015 15:03:14 GMT
.... I also believe that lenders are sometimes not totally innocent themselves. Asking the same question simply takes up time and that time IMO is wasted never to be recouped. The advantage of answering the same question again is that it only takes seconds. AC are not run off their feet by this.
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shimself
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Post by shimself on Jul 10, 2015 15:06:37 GMT
... What has deeply troubled me is that
... What has deeply troubled me is that I suspect the buffer had never been built up and THEY (AC) didn't notice. It's likely that Chris's changes will fix that narrow problem, but I'd hope and suggest that AC put together a fuller set of monitoring metrics.
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SteveT
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Post by SteveT on Jul 10, 2015 15:07:12 GMT
This is not so much being economical with the truth but more a case of being economical with the facts. So whilst AC seem to be quite verbose in their replies to questions that are relatively easy to answer when it comes to a situation like L**ds Commercial and other buffer problems that have come to light since, they become reticent to answer. There are probably several reasons for this and for AC as a new business, a general reluctance to reveal bad news for fear of tuning off investors. However as we all know, eventually the information will get out and then it can do more damage than having come clean at an early stage. It is then that the issues of trust, honesty, etc. tend to get banded around. All very bad for a business trying to grow. As I stated in my previous post we are committed to transparency and will be ensuring solutions are coded that give you absolutely every bit of relevant information we have. By this time next week every loan with an interest buffer will have the current value of the buffer displayed against it. , that's excellent news. In future, if a monthly repayment has to be made from the buffer rather than by the borrower direct, will this automatically suspend trading in the loan just as a late payment does now (for, say, a minimum 48 hours)? Otherwise I'm concerned that the more attentive lenders may be inclined to offload their investments to others at the first sign of a buffer being drawn upon?
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Post by chris on Jul 10, 2015 15:34:21 GMT
As I stated in my previous post we are committed to transparency and will be ensuring solutions are coded that give you absolutely every bit of relevant information we have. By this time next week every loan with an interest buffer will have the current value of the buffer displayed against it. , that's excellent news. In future, if a monthly repayment has to be made from the buffer rather than by the borrower direct, will this automatically suspend trading in the loan just as a late payment does now (for, say, a minimum 48 hours)? Otherwise I'm concerned that the more attentive lenders may be inclined to offload their investments to others at the first sign of a buffer being drawn upon? That's not been decided upon yet but we are circulating such rules internally for sign off before publishing them for lenders.
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Mike
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Post by Mike on Jul 10, 2015 16:36:35 GMT
I am amazed at this situation still. What do lenders think buffers are for?!
Get rid of them from the CR if they cause this much grief. They are buffers and they have been used for exactly the purpose most people would understand.
The buffer is there to be used its not there to be an excuse to suspend loans or indicate lack of repayment - because repayment HAS been made, out of the buffer!
Am I wasting my time? Does someone know something I don't about what a buffer is for?
I really feel AC are in danger of pandering to lenders too much on this 'independent forum' its great you listen but being so proactively involved has provoked enormous expectation and I think unrealistic ones too. We are your market and so we have a voice but I would rather you spent time on more important things than worry about interest buffers being maintained at an urgency equivalent to loan repayments.
In the end you will only get fed up and make a large minimum bid/investment that cuts many users off to avoid this customer service ordeal whenever any loan goes bad and people cry for comp...
Listen sensibly please and dont assume (some) lenders are right or that their demads should be a priority.
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