jimc99
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Post by jimc99 on Oct 13, 2015 18:35:24 GMT
Thanks for that Kev. Personally I think it right that the sell out fees should deter people "gaming" the system as described above. The liquidity investors get from the sell out function gives me some peace of mind that if necessary I can access most of my investment.
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sl75
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Post by sl75 on Oct 13, 2015 21:55:10 GMT
6.4.1.
determine the total interest you earned on the capital you want to withdraw up to the date of the Sellout (‘A’); ...
Interesting... Has this changed recently? This was my main point of contention about the function... it calculated the fee based on all interest ever earned on the contract, rather than merely the capital you want to withdraw. This is very different when, for example, selling out the final £30 of a loan contract that was originally for £1000! If it has changed, congratulations to RS for seeing sense finally... ... and if it's always said that, will everyone who has used the function and been overcharged need to claim the difference between the fee actually charged and the fee as it should be calculated according to the T&Cs, or will RS be refunding it automatically?
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Post by westonkevRS on Oct 14, 2015 6:41:10 GMT
... and if it's always said that, will everyone who has used the function and been overcharged need to claim the difference between the fee actually charged and the fee as it should be calculated according to the T&Cs, or will RS be refunding it automatically? Oh Jeez. *Kevin's eyes roll to the heavens, his heart weeps and feels sad for modern humanity* You try to help, and this is what happens. The recent publication is part of the changes for FCA where everything is better and more transparentely documented. All sell-outs performed previously were given the quote and given a "Take it or not" offer with a clear message of costs and capital to be repaid. Anyone who sold out accepted the offer and the calculation at that time, even if the exact mechanics were not published. Kevin.
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adrianc
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Post by adrianc on Oct 14, 2015 7:20:37 GMT
Oh Jeez. *Kevin's eyes roll to the heavens, his heart weeps and feels sad for modern humanity* You try to help, and this is what happens. <gives Kev a big, manly hug, and goes to put the kettle on to console him> <sneakily looks around> <nicks a couple of purple mugs>
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ikorodu
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Post by ikorodu on Oct 14, 2015 7:30:04 GMT
Oh Jeez. *Kevin's eyes roll to the heavens, his heart weeps and feels sad for modern humanity* You try to help, and this is what happens. <gives Kev a big, manly hug, and goes to put the kettle on to console him> <sneakily looks around> <nicks a couple of purple mugs> <and a couple of biccys>
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pikestaff
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Post by pikestaff on Oct 14, 2015 7:40:03 GMT
westonkevRSThanks for your post linking to the Lender Agreement. IMO it would be better it this was visible before signing up. You really should do something about the marketing blurb, which is misleading. But there is also an error in either the public website or the Lender Agreement: - If you look at the summary of sell out costs on this page www.ratesetter.com/lend/access under the heading "What's the catch?" you will see the minimum +0.25% added to the interest deficit component, with the effect that lenders will always pay it, in addition to the adjustment to cumulative interest earned).
- By contrast, the Lender Agreement presents the 0.25% as a floor to the Return Fee, so lenders will only pay it to the extent that the adjustment to cumulative interest earned is less than 0.25%.
You should check what actually happens and correct one or the other accordingly. It is possible that both are wrong and the 0.25% is a floor on the total fee! Edit: Completely separate point but, if 6.4.1 as quoted by sl75 means what he thinks it means, the calculation does now encourage "gaming". I rather hope that it doesn't mean that. (Good job I've got a tin hat )
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Post by westonkevRS on Oct 14, 2015 7:57:06 GMT
westonkevRSThanks for your post linking to the Lender Agreement. IMO it would be better it this was visible before signing up. You really should do something about the marketing blurb, which is misleading. But there is also an error in either the public website or the Lender Agreement: - If you look at the summary of sell out costs on this page www.ratesetter.com/lend/access under the heading "What's the catch?" you will see the minimum +0.25% added to the interest deficit component, with the effect that lenders will always pay it, in addition to the adjustment to cumulative interest earned).
- By contrast, the Lender Agreement presents the 0.25% as a floor to the Return Fee, so lenders will only pay it to the extent that the adjustment to cumulative interest earned is less than 0.25%.
You should check what actually happens and correct one or the other accordingly. It is possible that both are wrong and the 0.25% is a floor on the total fee! Edit: Completely separate point but, if 6.4.1 as quoted by sl75 means what he thinks it means, the calculation does now encourage "gaming". I rather hope that it doesn't mean that. (Good job I've got a tin hat ) Thank you pikestaff that's useful feedback. I'll copy over to Marketing and Compliance and make sure they are both singing from the same six pack. Kevin.
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oldgrumpy
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Post by oldgrumpy on Oct 14, 2015 8:23:30 GMT
We don't want a flaw in the floor.
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am
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Post by am on Oct 14, 2015 11:15:53 GMT
"6.2.
Using the Sellout option may result in the overall interest earned being significantly lower than the Lender Rate you selected when making your original offer to lend. This is because the amount returned to you will be adjusted to account for the lower interest rate applicable to monies invested over a shorter term and for any change in the rates available on the Exchange."
If I understand correctly you can not only lose all your interest but also some of your capital if interest rates have moved in the wrong direction. This would particularly apply to people who have lent at the "Lend Now" rate.
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Post by p2plender on Oct 14, 2015 13:03:05 GMT
worth noting that when I enquired to a BS about cashing in a 5yr bond in the 5th year it attracted a loss of 1 year's interest. Not sure of financial damage cashing in earlier is.
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Post by lb on Oct 14, 2015 15:37:53 GMT
"6.2. Using the Sellout option may result in the overall interest earned being significantly lower than the Lender Rate you selected when making your original offer to lend. This is because the amount returned to you will be adjusted to account for the lower interest rate applicable to monies invested over a shorter term and for any change in the rates available on the Exchange." If I understand correctly you can not only lose all your interest but also some of your capital if interest rates have moved in the wrong direction. This would particularly apply to people who have lent at the "Lend Now" rate. RS has a flawed model IMHO. As soon as they try to raise rates (if they ever need to, which they will one day) their 1/3/5 year holders are going to lose a LOT of capital if they want to move on. Their model only works in a rate reducing environment. The same applies to Wellesley/Zopa. Both models are highly exposed to an increasing rate environment. existing lenders are going to feel a bit peeved when they have lent for 5 years (at 5.5%) but rates are at 10% their debt will fall in value by > 20% ... i.e. approximate capital loss on exit within first year.
I think RS/W/Z need to be far more transparent about what the real risk of debt > 1 year is. It is not borrower defaults and provision funds are irrelevant. rates can hardly get much lower ... see what I mean?
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am
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Post by am on Oct 14, 2015 16:28:13 GMT
"6.2. Using the Sellout option may result in the overall interest earned being significantly lower than the Lender Rate you selected when making your original offer to lend. This is because the amount returned to you will be adjusted to account for the lower interest rate applicable to monies invested over a shorter term and for any change in the rates available on the Exchange." If I understand correctly you can not only lose all your interest but also some of your capital if interest rates have moved in the wrong direction. This would particularly apply to people who have lent at the "Lend Now" rate. RS has a flawed model IMHO. As soon as they try to raise rates (if they ever need to, which they will one day) their 1/3/5 year holders are going to lose a LOT of capital if they want to move on. Their model only works in a rate reducing environment. The same applies to Wellesley/Zopa. Both models are highly exposed to an increasing rate environment. existing lenders are going to feel a bit peeved when they have lent for 5 years (at 5.5%) but rates are at 10% their debt will fall in value by > 20% ... i.e. approximate capital loss on exit within first year.
I think RS/W/Z need to be far more transparent about what the real risk of debt > 1 year is. It is not borrower defaults and provision funds are irrelevant. rates can hardly get much lower ... see what I mean?
Risk of loss and risk of inaccessibility are, IMO, different things, but if someone needs the money for some reason they might feel that it's a distinction without a difference. One ambiguity is what market the debt is resold on, which affects the size of the assignment fee. After two years, is five year money resold on the five year or the three year market. The latter would leave lenders less at risk of hefty assignment fees as a result of rate movements. It would also mean that the cost of exit after 23 months could be much higher than the cost after 25 months. There's also the question of what the rate used to calculate the assignment fee is - which with the size of the daily fluctuations is not an academic point.
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pikestaff
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Post by pikestaff on Oct 14, 2015 16:29:49 GMT
I have a lot of 5 year RS loans made at 4.9 and 5% in 2013 that would cost me a fortune to get out of, but I don't see this as a flaw. It's perfectly fair that we should be charged when rates rise, just as we would be charged to get out of a fixed rate deposit (if we were allowed out at all), or to get out of a fixed rate mortgage if rates fell. It's not quite so fair that RS keep the difference if rates go the other way, but at least they are transparent about it.
I agree, however, that many lenders probably don't understand this, especially if they have been misled by the marketing spiel.
Be that as it may, p2p rates are unlikely to go up from their present high levels any time soon. The scenario that worries me more is a big drop in rates when p2p ISAs come on stream, followed by a bad event (maybe a platform failure) which causes rates to go up again and a mad rush to the exit. Then we will hear the screams.
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Post by GSV3MIaC on Oct 14, 2015 16:41:07 GMT
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pikestaff
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Post by pikestaff on Oct 15, 2015 6:35:08 GMT
TrustBuddy is far enough away, and the current UK p2p lender base small enough, that it's unlikely to cause big waves over here (except perhaps at the FCA). And I don't think it will do any harm if it makes people think harder before they invest - especially in the less transparent platforms.
I was thinking of what will happen if a UK platform fails after p2p has gone mass market, sucking in lots of ISA money.
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