Writeoffs

Indeed, the problem there was at least in part a correct assertion that the platform representative had not addressed the effectiveness of the due diligence but merely asserted that it was greater than in other places. Not malicious misrepresentation but that the question asked was A and the answer given was to a different question B to dodge answering question A. It's natural for lenders to be unhappy with that response and repeat the question of whether Bondora was happy with the result of the due diligence level used.

The reasons for that are of course made clear by my own followup question which has also not been answered and by the approximate figures I then subsequently provided: the due diligence level used meant that even today only about 19% of the capital lent in 2014 in that market is in loans that haven't already defaulted. It doesn't matter whether the due diligence level was more or less than in other countries but whether it worked and the value of loans in default makes the answer to that obvious even without getting into the issue of borrower fraud and effectiveness or otherwise of debt collection.

I assume that Bondora was also not happy with the result of the due diligence level used, nor with the effect it has clearly had on lender trust in the platform, particularly when combined with Bondora removing the option to select which countries (not) to lend to using the automatic system.

But will Bondora accept that only 19% of capital not in defaulted loans was a demonstration of inadequate due diligence? Based on past performance in such matters, I doubt it.

I assume they will continue to present cash flow numbers that ignore the level of future capital payments that are in defaulted loans and unlikely to ever be paid, even though they have a model for default rates and debt collection effectiveness and clearly do know that much of this money is not going to be paid. And naturally lenders who know this will view this approach taken as a misrepresentation of the true performance of the markets concerned and probably also as deliberate because Bondora does know that much of the money is never going to be paid..Since capital is a higher part of loan repayments towards the end of the term and we're still about two and a half years until the last of the 2014 loans have all capital overdue it will be some time before the cash flow approach gives a picture that is a better representation of the likely very poor end result. At that point it will under-state the performance because debt collection activity will remain and the performance presented in the cash flow method should start to improve again.

The Slovakian and Spanish markets, the move to push lenders into them by restricting the automatic tool and how platform presents their performance seem likely to remain as ongoing reasons why people might recommend against using this platform for some considerable time.

Can Bondora do anything to mitigate this? Maybe. Public acceptance and presentation of the projected future cash flow performance of the two markets if future capital and interest payments are made according to the model used at the time the loans were made might be one approach. By model I mean things like remaining expected defaults and percentages of capital and interest expected to be made for loans that have already defaulted. This should at least remove the objection that the defaulted capital is not being recognised yet by the cash flow approach and show that Bondora is willing to look at the result of that in the longer term.

Of course there is also the added difficulty of many here writing in a language that is not their native language. That greatly adds to the potential for misunderstanding and avoidable disagreements.