Post by adrianc on Feb 2, 2017 9:15:27 GMT
Would somebody please explain in layman's terms what the changes mean that may lead us to wish to withdraw our money. I have to confess to not being able to interpret the information too well. Thanks.
members.ratesetter.com/static/documentation/terms/ratesetter_lender_terms_01-02-17.pdf
Section 8 is the bit we're looking at.
8. Stabilisation Period
8.1 - If at any time, in the opinion of RateSetter, the Provision Fund does not have sufficient funds to cover current or expected borrower defaults (a "Negative Position"), and RateSetter reasonably believes the Negative Position is not capable of being rectified through the ordinary course of business, RateSetter may put the Exchange into a “Stabilisation Period”. If the Exchange enters a Stabilisation Period, RateSetter will continue to treat all RateSetter Customers fairly and act in their best interests, seeking to minimise the loss to lenders at all times and to exit the Stabilisation Period as soon as possible.
8.2 - During a Stabilisation Period, the Lender Rate and/or capital repayments lenders are entitled to may be reduced in accordance with terms 8.4 and 8.5 below (an “Interest Reduction” or a “Capital Reduction” respectively). The amount of any reduction will apply equally to all RateSetter Customers entitled to protection from the Provision Fund (the “Eligible Lenders”) and will be paid in full into the Provision Fund.
8.3 - The amount of any Interest Reduction or Capital Reduction will be reflected in your RateSetter Account when the deduction is made but will only be paid into the Provision Fund when the relevant payment is made by the borrower. For example, if your funds are invested in the 1 year market, any reduction made would be reflected in your RateSetter Account immediately but would only be available to be paid into the Provision Fund at the end of the loan term when the borrower repays in full.
8.4 - An Interest Reduction will be applied if RateSetter reasonably believes the Provision Fund Coverage Ratio is or will imminently be below 100%. An Interest Reduction will result in a reduction to the Lender Rate you are entitled to receive during the relevant period. For example, if you have invested £1,000 at a Lender Rate of 5%, during normal operation approximately 14p of interest would accrue daily ((£1,000 x 0.05) / 365). If there is an Interest Reduction of 50% for 10 days, the Lender Rate for those 10 days would reduce to 2.5% and interest would accrue at 7p per day. When the borrower pays that interest (which could be during or after the Stabilisation Period), 70p will automatically be deducted from the payment due to you (10 x 7p) and paid into the Provision Fund.
8.5 - A Capital Reduction will be applied if RateSetter reasonably believes the Capital Coverage Ratio is or will imminently be below 100%. If there is a Capital Reduction, you agree to assign your right to the amount of the Capital Reduction to the Provision Fund. For example, if you have £1,000 matched on the Exchange and there is a Capital Reduction of 1%, you agree to assign the right to £10 of capital to the Provision Fund. You will then no longer have any right to that amount of capital or any interest accruing on that capital. When the borrower next makes a payment of capital (whether or not that is during the Stabilisation Period), £10 of the payment will be automatically deducted and paid into the Provision Fund.
8.6 - We will notify you, along with all other Eligible Lenders if the Exchange enters into or ceases to be in a Stabilisation Period and/or if an Interest Reduction or Capital Reduction is applied, increased or reduced. All notifications will be made by email to the address on your RateSetter Account and will be posted publicly on our website. Any Interest Reduction and/or Capital Reduction will apply equally to all loans outstanding and matched to the Eligible Lenders at the date of the notification.
8.1 - If at any time, in the opinion of RateSetter, the Provision Fund does not have sufficient funds to cover current or expected borrower defaults (a "Negative Position"), and RateSetter reasonably believes the Negative Position is not capable of being rectified through the ordinary course of business, RateSetter may put the Exchange into a “Stabilisation Period”. If the Exchange enters a Stabilisation Period, RateSetter will continue to treat all RateSetter Customers fairly and act in their best interests, seeking to minimise the loss to lenders at all times and to exit the Stabilisation Period as soon as possible.
8.2 - During a Stabilisation Period, the Lender Rate and/or capital repayments lenders are entitled to may be reduced in accordance with terms 8.4 and 8.5 below (an “Interest Reduction” or a “Capital Reduction” respectively). The amount of any reduction will apply equally to all RateSetter Customers entitled to protection from the Provision Fund (the “Eligible Lenders”) and will be paid in full into the Provision Fund.
8.3 - The amount of any Interest Reduction or Capital Reduction will be reflected in your RateSetter Account when the deduction is made but will only be paid into the Provision Fund when the relevant payment is made by the borrower. For example, if your funds are invested in the 1 year market, any reduction made would be reflected in your RateSetter Account immediately but would only be available to be paid into the Provision Fund at the end of the loan term when the borrower repays in full.
8.4 - An Interest Reduction will be applied if RateSetter reasonably believes the Provision Fund Coverage Ratio is or will imminently be below 100%. An Interest Reduction will result in a reduction to the Lender Rate you are entitled to receive during the relevant period. For example, if you have invested £1,000 at a Lender Rate of 5%, during normal operation approximately 14p of interest would accrue daily ((£1,000 x 0.05) / 365). If there is an Interest Reduction of 50% for 10 days, the Lender Rate for those 10 days would reduce to 2.5% and interest would accrue at 7p per day. When the borrower pays that interest (which could be during or after the Stabilisation Period), 70p will automatically be deducted from the payment due to you (10 x 7p) and paid into the Provision Fund.
8.5 - A Capital Reduction will be applied if RateSetter reasonably believes the Capital Coverage Ratio is or will imminently be below 100%. If there is a Capital Reduction, you agree to assign your right to the amount of the Capital Reduction to the Provision Fund. For example, if you have £1,000 matched on the Exchange and there is a Capital Reduction of 1%, you agree to assign the right to £10 of capital to the Provision Fund. You will then no longer have any right to that amount of capital or any interest accruing on that capital. When the borrower next makes a payment of capital (whether or not that is during the Stabilisation Period), £10 of the payment will be automatically deducted and paid into the Provision Fund.
8.6 - We will notify you, along with all other Eligible Lenders if the Exchange enters into or ceases to be in a Stabilisation Period and/or if an Interest Reduction or Capital Reduction is applied, increased or reduced. All notifications will be made by email to the address on your RateSetter Account and will be posted publicly on our website. Any Interest Reduction and/or Capital Reduction will apply equally to all loans outstanding and matched to the Eligible Lenders at the date of the notification.
If the PF looks like it's running out of money so badly it can't be taken back to health by tickling the PF contributions from new loans, then they'll "stabilise" it.
If the PF falls below 100%, they'll dip into the interest they would pay you, and put that money into the PF.
If the capital coverage falls below 100%, they'll dip into your balance, and put that money into the PF.
They'll do that to everybody, equally, and they'll take as much as they think is needed.
Frankly, if this becomes an issue, they're only one small step away from a resolution event anyway, with enough momentum that means they'll be struggling not to take that step.
I'm more than happy to be corrected or to be pointed at something I've missed.