sl75
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Post by sl75 on Jan 11, 2016 7:56:59 GMT
As per my previous post, it seems to me that it is the lenders discretion whether to waive interest, and AC is merely allowing them the option to do so by not pre-empting that decision before a vote can occur. As lenders we can waive anything, we could vote to halve the interest rate whatever. Until that time the agreement should be operated as written - in this instance enhanced interest (+3%) should be imposed on the delayed repayments. The difficulty is that AC seem to have had advice that to charge (what is quite a modest penalty) amounts to armaggedon. Other platforms seem to manage it. For default interest that applies only to the delayed repayments, rather than to the whole loan, I'm not even sure where you're expecting to see it...? AC only displays the "whole loan" interest rate. ISTM that the best time to apply the default interest to a delayed payment is if or when the late repayment is received. My own interpretation was that it simply causes their systems and/or admin staff quite a bit of hassle to modify the repayment schedule (and I've seen such modifications go wrong several times), and that if they follow the "negotiate first" approach, they may only need to modify it once, but following your "shoot first, ask questions later" approach they may need to modify it many times to reflect every possible change in anticipated repayments during any ongoing negotiations (perhaps even every single day, because each day that no other agreement is reached with the borrower, the "correct" repayment schedule would show the whole of the arrears including any accrued default interest, being settled in full on that day). Perhaps more to the point, by waiting for a vote, this modification will be done at a time that the loan is suspended from trading, and so when they occasionally screw up the repayment schedule it doesn't suddenly trigger a bunch of automated sales or purchases. Several other platforms (including the largest in this space) seem to have trouble with the entire concept of showing default interest to lenders (or indeed in paying it to them!), so in many ways AC seem to me ahead of the curve here.
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shimself
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Post by shimself on Jan 11, 2016 8:41:07 GMT
AC wrote the loan agreement so they should be able to cope.
I get your point that it complicates the overall interest rate displayed to lenders, but in comparison to reminding the borrower of their responsibilities that isn't important.
It's nothing like shooting the borrower, a mild spanking is closer.
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mikes1531
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Post by mikes1531 on Jan 11, 2016 11:44:48 GMT
It's nothing like shooting the borrower, a mild spanking is closer. Default interest applied only to overdue amounts isn't even that... IMHO 'a slap on the wrist' would be an overstatement.
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Post by chris on Jan 11, 2016 11:54:08 GMT
It's nothing like shooting the borrower, a mild spanking is closer. Default interest applied only to overdue amounts isn't even that... IMHO 'a slap on the wrist' would be an overstatement. *Unless the borrower has covenants on other borrower facilities whereby any default of any kind has to be reported and is counted as a breach. That slap on the wrist could end up with other facilities demanding immediate payback and resulting in a cascade of trouble for the borrower. The credit team are putting together comprehensive information on this for inclusion on the site in Q1. * As I understand it of course.
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sl75
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Post by sl75 on Jan 11, 2016 13:00:36 GMT
It's nothing like shooting the borrower, a mild spanking is closer. Even so, going directly to a mild spanking [in full view of other creditors], rather than a mere mention [in private communications] of a possible mild spanking, may later be perceived as unfair, overly-aggressive or hasty. Considering the long game, I'd rather AC not do anything that may eventually cause a judge to be sympathetic to the borrower when given their side of the story. If AC as our agents are perceived as "unreasonably inflexible" in the face of minor transgressions, and particularly if the borrower or their representatives can successfully argue that this directly contributed to the failure of the borrower's business, I'd be concerned that we might not be able to achieve as good an outcome as in the case where AC can provide a dossier detailing the many dozens of opportunities the borrower was given to rectify the situation at each step of the process, all of the missed deadlines, broken promises, etc. and how it is unambiguously the borrower's unreasonable attitude that has led to AC reluctantly bringing this case before the court. Formally applying the default interest to the loan seems to me just the first step along a potentially very long journey, where the borrower is given ample opportunity to rectify the situation (or ample rope to hang themselves with if they really had no intention of following through with their promises).
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shimself
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Post by shimself on Jan 12, 2016 19:23:16 GMT
Is a late payment penalty the same as a default?
Not on other platforms it isn't, and if it is the case then why does the loan agreement say that a late penalty rate will be applied. (not just might happen, actually will happen)
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Post by chris on Jan 12, 2016 20:12:24 GMT
Is a late payment penalty the same as a default? Not on other platforms it isn't, and if it is the case then why does the loan agreement say that a late penalty rate will be applied. (not just might happen, actually will happen) Other platform's approaches aren't necessarily right, nor compliant with our legal docs and processes or those of other lenders who would class it as a default regardless of what we called it.
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shimself
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Post by shimself on Jan 12, 2016 22:48:47 GMT
Is a late payment penalty the same as a default? Not on other platforms it isn't, and if it is the case then why does the loan agreement say that a late penalty rate will be applied. (not just might happen, actually will happen) Other platform's approaches aren't necessarily right, nor compliant with our legal docs and processes or those of other lenders who would class it as a default regardless of what we called it. Your legal doc that I have seen says that in the event of late payment default interest rate WILL BE applied to the delayed part, no ifs no buts no subject to lender agreement . Your handling is simply not compliant with that.
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Post by chris on Jan 12, 2016 22:50:33 GMT
Other platform's approaches aren't necessarily right, nor compliant with our legal docs and processes or those of other lenders who would class it as a default regardless of what we called it. Your legal doc that I have seen says that in the event of late payment default interest rate WILL BE applied to the delayed part, no ifs no buts no subject to lender agreement . Your handling is simply not compliant with that. That's a different point and one I've been instructed not to debate with you for reasons you're aware of.
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