shimself
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Post by shimself on Nov 11, 2015 20:18:45 GMT
Another loan has a hiccup and the borrower is asking for a delay on a part repayment. Lenders are being asked to
Either say OK, extend the loan at the existing rate A
or ask AC to come up with some unspecified alternative B
In my mind there is practically no chance of lenders choosing B given the pitch from AC
What bugs me considerably is that within the standard loan agreement there is a clause which says, quite straightforwardly, that in the even of delayed repayment the borrow shall pay an enhanced interest rate. Not might pay, shall pay. So what on earth is preventing AC from including this enhanced interest in the proposal? They aren´t even telling lenders that we are waiving our rights to this enhanced interest if we vote for an deferral.
The loan is W*** M******* C*** H***
I raised a complaint with AC when last they did this to me (us) on another loan. They rejected the complaint so it is now on its way to the ombudsman. I cannot believe they do this as policy, what is wrong with them? If I am paid late I want the enhanced interest specified in the agreement unless there is a damn good reason.
This will not change things as apparently only 10% of lenders are on the forum. I am open to any suggestions as to how to get them to treat lenders fairly in this regard. Maybe a poll will influence them:
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agent69
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Post by agent69 on Nov 11, 2015 20:27:04 GMT
Another loan has a hiccup and the borrower is asking for a delay on a part repayment. Lenders are being asked to Either say OK, extend the loan at the existing rate A or ask AC to come up with some unspecified alternative B In my mind there is practically no chance of lenders choosing B given the pitch from AC What bugs me considerably is that within the standard loan agreement there is a clause which says, quite straightforwardly, that in the even of delayed repayment the borrow shall pay an enhanced interest rate. Not might pay, shall pay. So what on earth is preventing AC from including this enhanced interest in the proposal? They aren´t even telling lenders that we are waiving our rights to this enhanced interest if we vote for an deferral. The loan is W*** M******* C*** H*** I raised a complaint with AC when last they did this to me (us) on another loan. They rejected the complaint so it is now on its way to the ombudsman. I cannot believe they do this as policy, what is wrong with them? If I am paid late I want the enhanced interest specified in the agreement unless there is a damn good reason. This will not change things as apparently only 10% of lenders are on the forum. I am open to any suggestions as to how to get them to treat lenders fairly in this regard. Maybe a poll will influence them: I voted B I'm fed up with borrowers thinking that compliance with the terms of the loan agreement is optional
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Post by chris on Nov 11, 2015 20:36:22 GMT
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shimself
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Post by shimself on Nov 11, 2015 20:48:26 GMT
Well you need to think again. The borrower can ask, but the simple fact is that the original agreement says they have to pay enhanced interest if they pay late. Of course we should agree an extension, but at the same time we should get our enhanced interest - otherwise what is the point of the clause in the agreement. Other platforms do it. This is some insane post hoc lawyerish version which says that we have to go to war or roll over, not the reasonable arrangement previewed in the contract. Find another lawyer, this is baloney. In the event that the borrower fails to make any payment on the due date then interest on the unpaid amount shall accrue daily at the Default Rate. That is what it says, there is nothing wrong with it except you seem to have got your nix into such a twist that you seem to think that if we say OK we understand we will wait, then we have to forgo what is due to us. That cannot be right.
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Post by chris on Nov 11, 2015 20:53:03 GMT
Well you need to think again. The borrower can ask, but the simple fact is that the original agreement says they have to pay enhanced interest if they pay late. Of course we should agree an extension, but at the same time we should get our enhanced interest - otherwise what is the point of the clause in the agreement. Other platforms do it. This is some insane post hoc lawyerish version which says that we have to go to war or roll over, not the reasonable arrangement previewed in the contract. Find another lawyer, this is baloney. In the event that the borrower fails to make any payment on the due date then interest on the unpaid amount shall accrue daily at the Default Rate. That is what it says, there is nothing wrong with it except you seem to have got your nix into such a twist that you seem to think that if we say OK we understand we will wait, then we have to forgo what is due to us. That cannot be right. As per andrewholgate's explanation when the variation is agreed the loan is not in default. If you don't want to agree the variation then vote against it, you have that right alongside the other lenders.
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shimself
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Post by shimself on Nov 11, 2015 20:57:07 GMT
Well you need to think again. The borrower can ask, but the simple fact is that the original agreement says they have to pay enhanced interest if they pay late. Of course we should agree an extension, but at the same time we should get our enhanced interest - otherwise what is the point of the clause in the agreement. Other platforms do it. This is some insane post hoc lawyerish version which says that we have to go to war or roll over, not the reasonable arrangement previewed in the contract. Find another lawyer, this is baloney. In the event that the borrower fails to make any payment on the due date then interest on the unpaid amount shall accrue daily at the Default Rate. That is what it says, there is nothing wrong with it except you seem to have got your nix into such a twist that you seem to think that if we say OK we understand we will wait, then we have to forgo what is due to us. That cannot be right. As per andrewholgate's explanation when the variation is agreed the loan is not in default. If you don't want to agree the variation then vote against it, you have that right alongside the other lenders. You know damn well that every vote to date has gone the way that AC have steered it, and further that only 10% of lenders being on this forum there is no way of bringing this defect to voters attention. While the variation is being negotiated then the enhanced interest should be included by AC in the new agreement, it is very simple.
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Post by chris on Nov 11, 2015 21:02:17 GMT
As per andrewholgate's explanation when the variation is agreed the loan is not in default. If you don't want to agree the variation then vote against it, you have that right alongside the other lenders. Whn the variation is being negotiated then the enhanced interest should be included in the new agreement, it is very simple. Then vote against it. We have negotiated to get the best outcome we believe is possible, taking into account all the rules and regulations and laws that affect this process. If lenders vote to reject the proposal then we will either have to go back to the negotiating table or formally default the loan and begin recovery proceedings to try and recover lender capital and accrued interest via that route, with all the risks that takes. Be under no illusion that if the regulator or a court adjudges that we have not treated the borrower properly and fairly then lender capital is at risk of being written off.
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Post by pepperpot on Nov 11, 2015 21:59:36 GMT
I think shimself does have a point; if the loan were split into a £500k/3yr + a £200k/6mth bridge, would the bridge overrunning not incur default interest? (aka, loan #147/152 W***place Properties) However, that is not how the loan was proposed and so the distinction has been blurred, which means I have to hand judgment to AC of what is fair for this single facility. |
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pikestaff
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Post by pikestaff on Nov 11, 2015 22:51:18 GMT
I voted No. I think the charging (or not) of default interest should depend on whether the borrower has engaged constructively and on whether lenders (as a group) agree with the borrower's proposal. Which is basically where we are (I think).
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Nov 11, 2015 23:05:17 GMT
Quickly scanning distressed list and memory
#74, #115, #129, #132, #136, #137, #152, #56, #69, #103, #130, #134 #84 all had extensions at enhanced or default rates, #79 has an increased rate due to repayment plan
#120, #63 had/have extensions at standard rate, #112, #92, #143, #144, #123, #45, have breached terms/covenants without penalty
#114 is about to get extended with increased rate
So the answer would appear to be they do, and fairly often.
One thing I would like to see is the CR clearly spelling out what are the red lines that if breached will result in default and default rates and what is open to negotiation/variance at AC/lenders discretion. Some clarity on how a loan can be in default but not pay default interest would be helpful just to educate lenders better
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Mike
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Post by Mike on Nov 12, 2015 3:30:48 GMT
One thing I would like to see is the CR clearly spelling out what are the red lines that if breached will result in default and default rates and what is open to negotiation/variance at AC/lenders discretion. I'd like to see default rates in CR's too --- especially on short term loans. I emailed them to ask if 3% was essentially standard but the reply was that it's decided on a deal-by-deal basis. In which case a bit more info beyond just what the default rate is would also go a long way; but red lines is an invitation for trouble I feel. Anyway why do we have this poll, the answer (based on AC holdings) is already known for all the previous times we have been asked to vote on such things with real money at stake. We already have the democratic answer, no need to poll the forum subset? I voted 'no' since I have been 'let off' charges I have 'agreed' to paying before and (in some cases) there are circumstances that justify my request to be let off. Other times I have just chanced my luck and guess what? It's sometimes nice to be nice to nice people. I don't want to entrust my capital to a bunch of violent loan sharks who charge default interest at unfairly high rates (68% anyone) and enforce it as hard as they can. That isn't how I want my money used. There is a grey area in between being a push over and being nasty and greedy and it's called being compassionate and nice. The right balance of earning interest and being nice means default interest shouldn't be due in every case.
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Post by andrewholgate on Nov 12, 2015 9:09:57 GMT
I've covered it in the previous post that Chris highlights and I will state it one more time here.
A borrower has the right within the loan agreement to make a reasonable request to vary the agreement and that the lender has the right to agree or disagree with the variation. To be very clear, agreeing to a variation is NOT a default and charging default interest does not apply. The borrower does pay and in this case it will cost them £5.5k in additional interest.
I've spent nearly 20 years in SME lending including dealing with defaulted loans for a quarter of that time. When you work in that space, you know the exact legalities of what can and can't be done. I'm about to be made an Approved Person under that FCA regulations which involves having a thorough understanding of how the business works. Finally, I wrote (with our lawyers) our loan agreement so know it intimately. We will not put something to the lenders that we feel is unfair to any party or in breach of any legal or regulatory obligations.
I cannot comment on complaints that may or may not have been made, nor comment on whether they have progressed to the FOS.
I will not be making any further comment on this matter.
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oldgrumpy
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Post by oldgrumpy on Nov 12, 2015 9:51:20 GMT
Maybe Andrew will just give a sentence on this:
Is there not the possibility in cases like this to agree to the borrower's reasonable request with no default interest (subject to our vote), with the proviso that should the loan go into default immediately following the extension, the default interest will be backdated to the start of the agreed extension?
(Edit: ... not this loan, as extension terms have already been agreed subject to vote)
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shimself
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Post by shimself on Nov 13, 2015 8:18:09 GMT
... The borrower does pay and in this case it will cost them £5.5k in additional interest. The 5.5K is just because of an extension to the loan term in this case, and of course the borrower can in fact terminate the loan whenever they come into funds, so that is misleading. Maybe you could explain here or elsewhere the point of 6.2 if it isn't to cover this sort of disruption.
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Post by andrewholgate on Nov 13, 2015 17:38:18 GMT
Maybe Andrew will just give a sentence on this: Is there not the possibility in cases like this to agree to the borrower's reasonable request with no default interest (subject to our vote), with the proviso that should the loan go into default immediately following the extension, the default interest will be backdated to the start of the agreed extension? (Edit: ... not this loan, as extension terms have already been agreed subject to vote) Actually, that is what we do. We vary the loan but has the right to go back to that date and charge default interest from that date.
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