wysiati
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Post by wysiati on Apr 18, 2014 11:52:45 GMT
The issue of rebuildingsociety.com permitting its lenders to experience guaranteed £ losses on loan part purchases was raised in another thread by xordon: p2pindependentforum.com/thread/480/flippersHaving checked again today it is indeed the case and there at least 3 loans on its secondary market where the Buyer's Rate is negative for some of the microloans listed for sale . This is disappointing in particular as the issue was raised with rebuildingsociety.com around 1 year ago as a result of which the CEO provided an undertaking to disable the sale of microloans with an effective buyer rate of less than 5%. At that time some negative buyer loan rate loan parts were manually removed from the secondary market and the situation was actually worse because no buyer rate was even displayed, meaning that purchasers were oblivious to the guaranteed losses they would make on some purchases. If the platform and/or its representatives wish to dispute any of this then I have a large email trail which can be published to substantiate the matter. It is possible that these current secondary market listings which would result in guaranteed losses for the purchaser (and from which rebuildingsociety.com would also presumably earn seller fees/commission) are the result of some error. Another more troubling possibility would be that the CEO's undertaking has, for whatever reason, been reneged upon. Funding Knight is another platform which was allowing guaranteed losses on loan part purchase but which has taken action, as now formalised in its updated April 2014 T&Cs (Selling and Purchasing a Loan (F) Clause 7 - Introduce a clause to prevent loan parts being bought where the buyer would always make a loss). At least there is now recourse to the regulator, if required, to prevent such scenarios if the platforms themselves will not act. |
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mikes1531
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Post by mikes1531 on Apr 18, 2014 13:33:17 GMT
The issue of rebuildingsociety.com permitting its lenders to experience guaranteed £ losses on loan part purchases was raised in another thread by xordon: p2pindependentforum.com/thread/480/flippersHaving checked again today it is indeed the case and there at least 3 loans on its secondary market where the Buyer's Rate is negative for some of the microloans listed for sale . <snip> Funding Knight is another platform which was allowing guaranteed losses on loan part purchase but which has taken action, as now formalised in its updated April 2014 T&Cs (Selling and Purchasing a Loan (F) Clause 7 - Introduce a clause to prevent loan parts being bought where the buyer would always make a loss). I can see how it should be easy enough to put restrictions on the sale of parts to address this issue, but it may be necessary to temper slightly the words used. The loan parts may be for sale at a price that would mean the buyer will make a loss if they hold that loan part until maturity, but I'm not sure it's appropriate to use the word 'guarantee' if there's a possibility that the buyer could turn around and sell that part at some time in the future at a sufficient premium that they actually won't have made a loss.
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wysiati
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Post by wysiati on Apr 18, 2014 15:24:48 GMT
The issue of rebuildingsociety.com permitting its lenders to experience guaranteed £ losses on loan part purchases was raised in another thread by xordon: p2pindependentforum.com/thread/480/flippersHaving checked again today it is indeed the case and there at least 3 loans on its secondary market where the Buyer's Rate is negative for some of the microloans listed for sale . <snip> Funding Knight is another platform which was allowing guaranteed losses on loan part purchase but which has taken action, as now formalised in its updated April 2014 T&Cs (Selling and Purchasing a Loan (F) Clause 7 - Introduce a clause to prevent loan parts being bought where the buyer would always make a loss). I can see how it should be easy enough to put restrictions on the sale of parts to address this issue, but it may be necessary to temper slightly the words used. The loan parts may be for sale at a price that would mean the buyer will make a loss if they hold that loan part until maturity, but I'm not sure it's appropriate to use the word 'guarantee' if there's a possibility that the buyer could turn around and sell that part at some time in the future at a sufficient premium that they actually won't have made a loss. When raised with rebuildingsociety the point was indeed made with respect to guaranteed losses being incurred if held to maturity. The thread title did not have enough space to fit it all in - I shall look to amend. Note though that the platform is providing no guarantees of being able to re-sell at a premium sufficient to ensure that no loss would be incurred if done prior to maturity and prepayment would guarantee a loss. Also, for the loan parts available currently at negative buyer rates on the platform which formed the basis for the thread/post these are listed with a 5% premium applied (the maximum allowed by rebuildingsociety) so being able to "sell that part at some time in the future at a sufficient premium that they actually won't have made a loss" would not appear to be a likely scenario and, again, there is no guarantee of being able to avoid a loss by reselling a microloan which will in most cases also have been subject to further amortisation. The more fundamental point is that the CEO provided an undertaking to disable the sale of microloans below a certain % buyer rate threshold and so prevent guaranteed losses on loan parts held to maturity, which is the default scenario at the point of purchase/sale, and yet there they are back on the platform. For me at least it has become a question of whether or not can I trust what I am being told by key individuals/representatives and therefore future participation (on this or any other platform).
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mikes1531
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Post by mikes1531 on Apr 18, 2014 21:50:19 GMT
The more fundamental point is that the CEO provided an undertaking to disable the sale of microloans below a certain % buyer rate threshold and so prevent guaranteed losses on loan parts held to maturity, which is the default scenario at the point of purchase/sale, and yet there they are back on the platform. For me at least it has become a question of whether or not can I trust what I am being told by key individuals/representatives and therefore future participation (on this or any other platform). That's probably the most important point, and really does require a response from ReBS. How about it nickrebuildings, garyl, or danraj?
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shimself
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Post by shimself on Apr 29, 2014 13:39:11 GMT
The loan parts may be for sale at a price that would mean the buyer will make a loss if they hold that loan part until maturity, but I'm not sure it's appropriate to use the word 'guarantee' if there's a possibility that the buyer could turn around and sell that part at some time in the future at a sufficient premium that they actually won't have made a loss. But in that event the subsequent buyer would be faced with a "guaranteed loss". This sounds like the argument about finding a forgery in one's change, do you try to spend it?
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Post by nickrebuildings on Apr 30, 2014 15:57:37 GMT
Hi All,
Dan will reply to this thread this week. Thanks for raising it here - you can also get in touch through support@rebuildingsociety.com for any similar issues in the future.
Nick
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Post by danraj on May 7, 2014 0:06:41 GMT
Thanks for the discussion.
I've now restricted the listing of microloans to show only those with a buyer's rate above or equal to 5%. It's been in my task list for over a year to finish this off, so I'm glad its now done. I'll be working on a new tab in the dashboard to make the management of selling microloans quick & easy, currently its difficult to re-list a microloan at a different rate and lenders have no idea where their microloan ranks against other lenders without checking. We're trying to attract new lenders at the minute so any ideas on usability improvements or attractive features would be most welcome. I'll pay a bonus of £50 for ideas that make it into the site. Just be sure to let me know your user login, if different on rebuildingsociety.com Please open a different thread for a discussion on ideas. We're especially keen to steal market share from competitors.  Dan
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shimself
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Post by shimself on May 12, 2014 14:27:31 GMT
Idea number 1 = make the total on the dashboard correct! (as per emails). I claim £50.
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Post by Deleted on Aug 14, 2014 0:53:46 GMT
Hi Dan,
I think personally that if you just remain true to the principles of P2P and free market finance, you'll automatically steal market share from competitors.
There are already companies using government-backed money which introduces moral hazard into the system. A sizeable majority offer FSCS-style guarantees and bail-outs to lenders, increasing moral hazard even further.
If you just avoid comfort blankets and hand-outs, you'll automatically be seen as the most honest platform out there, which you already are.
Maintaining the direct approach as well is good, with investors actually feeling real world enthusiasm for the companies. That cake lady is very likeable and the guy who put his house on the line and actively called for more enthusiasm! These are heroes of our time and being associated with them directly is a real piece of added value compared to other more anonymous platforms.
Just keep doing what you're doing!!!
Greg
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