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Post by cassiopeia on Mar 17, 2016 16:29:08 GMT
Presumably if there was another financial crash or the housing market caved in, individual lenders would be unlikely to loose everything due to the diversity of companies they have lent to and any residual value left in the security lenders have offered on their borrowing? However, in a few cases it's far from clear to me what additional risk lenders are taking above that of debtors being able to pay back their loans if the underlying P2P company went bust. For example in the case of MoneythingThis is quite alarming because the potential risk is with a single company. Do we have a list of platforms which don't unambiguously offer lenders direct rights to any security lenders are willing to offer and fully segregates their accounts? If no security was offered by the borrower could we assume another P2P company would simply take over the operation of those loans, and the investors wouldn't lose the rights to interest? |
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Post by Deleted on Mar 17, 2016 18:38:38 GMT
As part of the FCA authorisation, platforms must have a 'contingency' plan in place should they collapse. This effectively entails having a formal, contractual arrangement with a suitably able 3rd party (whether it be another p2p or not) who would run the book to maturity in the event the platform when bust.
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Post by mrclondon on Mar 17, 2016 18:46:10 GMT
The risk associated with a platform failure is that the regular ongoing loan monitoring to attempt to pre-empt loans going bad would likely cease (but you could argue that few platforms put as much effort into this as they should anyway) and recovery of distressed loans would probably yield slightly less as there would be no point "going the extra mile" as there is no longer a p2p brand to protect (i.e. whilst trading a platform will want to demonstrate it is doing everything possible to recover funds, a third party wind-up service wouldn't need to and would want to complete the task in a sensible timeframe)
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homes119
Member of DD Central
Posts: 93 
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Post by homes119 on Mar 17, 2016 19:45:14 GMT
For an idea of how ugly things can get it's good to follow the Trustbuddy case:
Here is a the letter to Lenders sent by the law firm handling the case:
www.lindahl.se/media/1103282/letter_to_lenders_8_january_2016.pdf
Different jurisdictions and all but lenders should not be surprised to give up a sizeable chunk of the "claimed" amount which may be substantially lower than owed amount.
I think we shouldn't underestimate the adverse impact a bankruptcy would have.
It's not as simple as buyout from other p2p company or transfer operations to a 3rd party and we're good to go.
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Post by cassiopeia on Mar 18, 2016 9:23:51 GMT
Perhaps lenders need 100% confidence that any security offered at the time of the loan wouldn't be lost in the effect of the P2P company going bust. I think this is the issue with Moneything model, since the lenders contract was with the P2P company not the borrower. Are there any other platforms which this might be the case?
Even in cases were there is no security, there must be significant work is in pursuing debtors. The lenders profits would be severely compromised unless sufficient resources are committed to this, but why would any company wish to take on this task without asking for a significant fee?
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Post by MoneyThing on Mar 18, 2016 10:18:42 GMT
Morning,
I would just like to highlight that lenders who participate in MoneyThing loans, have a direct equitable interest in the loan (by % proportion & specific interest rate), under a Deed of Assignment (DoA). Thus, for 100% funded loans, these are fully assigned over to participating lenders and MoneyThing simply continue as the appointed agent by the participants to manage the loan on their behalf. (There is a DoA for each loan which includes a schedule of all the participating lenders. For loans that are not 100%, MoneyThing retains the balance on this schedule until such time it has been fully funded).
In addition, for added protection for lenders, we will shortly be announcing an enhanced structure whereby a separate entity (Security Trustee), will hold the underlying security on behalf of the lender participants. (This entity will undertake no other activity.) Will communicate all the details in due course.
Kind regards,
Ed
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shimself
Member of DD Central
Posts: 2,563
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Post by shimself on Mar 18, 2016 12:31:53 GMT
For an idea of how ugly things can get it's good to follow the Trustbuddy case:
Here is a the letter to Lenders sent by the law firm handling the case:
www.lindahl.se/media/1103282/letter_to_lenders_8_january_2016.pdf
Different jurisdictions and all but lenders should not be surprised to give up a sizeable chunk of the "claimed" amount which may be substantially lower than owed amount.
I think we shouldn't underestimate the adverse impact a bankruptcy would have.
It's not as simple as buyout from other p2p company or transfer operations to a 3rd party and we're good to go. But Trustbuddy told a lot of lies, and made a lot of bad loans which they said were good, that is where most of the loss stems from (isn't it)?
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homes119
Member of DD Central
Posts: 93
Likes: 19
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Post by homes119 on Mar 18, 2016 15:00:23 GMT
For an idea of how ugly things can get it's good to follow the Trustbuddy case:
Here is a the letter to Lenders sent by the law firm handling the case:
www.lindahl.se/media/1103282/letter_to_lenders_8_january_2016.pdf
Different jurisdictions and all but lenders should not be surprised to give up a sizeable chunk of the "claimed" amount which may be substantially lower than owed amount.
I think we shouldn't underestimate the adverse impact a bankruptcy would have.
It's not as simple as buyout from other p2p company or transfer operations to a 3rd party and we're good to go. But Trustbuddy told a lot of lies, and made a lot of bad loans which they said were good, that is where most of the loss stems from (isn't it)? Yes of course. However, my point is related to the high % costs on claims (likelihood will be more funds recovered if there is no fraud). So fraud or not, expect to give up a significant percentage for transferring operational run-down of the loan book and recoveries. This is irrespective of fraud. So yes, most platforms have a plan in case of failure, but how much will it cost to implement this plan? Also, fraud is one of the biggest operational risks. Doesn't the Trustbuddy case support this claim? But yes, let's hope it will remain an isolated case. A lot of ponzi schemes started out as honest operations... when things got bad, the ponzi scheme was initiated as a very short term thing until the "market" recovers and things get good again... you know how the story often ends... All i'm saying is "be prepared for the worst, hope for the best"
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Post by cassiopeia on Mar 18, 2016 21:07:03 GMT
If so, do any P2P companies have relevant insurance against fraud? I recall Hargreaves Lansdowne as a conventional broker does. I'm not sure to what extent this applies to their P2P venture.
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