904 Chair***** B*****

Phew: for a horrible moment, on a search of my loan book I thought I was holding that. But no, got a 'match' for loan ID 1904.

I have noticed that FC have been doing quite a bit of that lately. It now seems like at the smallest excuse, a loan that is having payments fulfilled is defaulted. Now, I seem to remember there was a 'zombie loan thread' on here that was clamouring for loans to be defaulted (well not all loans, obviously). I have at least a couple which were happily being paid up (e.g. by guarantor) for a reasonable period, as soon as they went into a 'half payment' or whatever (with promise to catch up) they were defaulted AND passed to the loan recoveries: and new comments start to appear about 'we expect full recovery....minus fees'. Ummmmmmm, so a loan that was chugging along with payments e.g. by a separate company or guarantor is now gong to have 20% less recovery value than it otherwise would: unless of course FC is going to charge those fees to the borrower.

There certainly seem to be legit circumstances where a loan should be defaulted regardless of payments being made in order to be able to crystalise a potential future claim against a PG - I think.

Whether all loans that go to default are now passed to the recoveries subsidiary, and whether they are all subject to the same max fee, I don't know. I am or will be particularly pee'd if a few loans I have which are paying up pretty well, and otherwise look on track for full payment are now subject to a substantial loss by way of fees going to the sub.

[Edited to remove typographic gibberish]

This is tricky. The borrower and the guarantor are different persons, and if the guarantor is making the repayments then after the Borrower has failed to make a number of consecutive repayments then presumably the borrower has defaulted. It depends what they do with the RBR, because I am not keen to have a loan undefaulted but RBR and untradable for the rest of its term. If the Borrower is not going to recover then best to default and treat as losses and recoveries - this at least makes our statistics honest. I was cross about the Zombie loans not being defaulted, and would be consistent here. I would worry about an automatic 20% for all such loans, but I would expect FCRL to be providing active supervision of the recoveries in these cases and would recognise that there is only so much work that can be done for the 1% collection fee. I would like to see a stronger collections/insolvency team and would accept that there should be some fees in the cases discussed here.
The one to watch is 4907, where the borrower was not eligible for the loan because of pre-existing CCJs which FC were not aware of (we do not know if the Borrower knew), and which went RBR after a few days and in administration after a couple of payments - to FC's great surprise. The guarantor has now made one payment and it looks set for a long-term RBR. I would prefer it defaulted and under the close supervision of FCRL, rather than FC behaving as if it were repaying normally, and a modest fee for that supervision seems reasonable. My principal, £500+, is at high risk and I want it back. If they offered me 80% recovery now I would take it.

Captain, I know you only want me for the bacon, or the salt pork on a long voyage.
We speak of a loan being in default but of course a loan has no agency and it is the Borrower who defaults on a loan contract - the Borrrower and the guarantor are not one and the same. In the loan conditions para 4.2 lists a number of circumstances in which FC can terminate a loan contract and demand repayment in full irrespective of the status of the payments - these may not be in arrears or  in default, but FC's notes are often not semantically accurate. If the borrower goes into administration or even applies to do so, or if the borrower ceases wholly or sustantially to trade then FC may terminate and demand repayment, irrespective of the status of payments and the willingless of the guarantor to keep paying. It is a matter of judgement as to the course of action which is most beneficial to the lenders (or I hope it is). In these circumstances FC 'defaults the loan' although the loan is not in default.
Take 4907 (please). A loan has been granted to a Borrower with pre-existing CCJs. It is allowed to run and then the Borrower goes into administation without even telling FC. Do I want three years of repayments under RBR by guarantor director or the guarantor company? No I want my principal returned and expect a small hit. Now if FC can effectively transfer the loan to the guarantor company and take sufficient security to allow them to remove the RBR then that is fine and I have the option to sell. But if they do not have sufficient confidence to remove the RBR then they should default it, and take reasonable fees to get back my principal.

I do not think that either of us is saying that. I believe that CC is saying that the loan should not be defaulted and the RBR should be retained and the loan not traded. I am saying that in the particular case, if the guarantor company agreement is not sufficiently robust to allow the loan to be traded then the loan should be defaulted and the principal returned (as losses and recoveries). Long term loans under RBR are too much like Zombie loans IMO. Neither of us is suggesting we trade anything any duffer than we are currently allowed to.

I agree with you, but once the loan is defaulted FCRL is free to recover the money in the best way, as it judges. It can still do this as scheduled payments of recoveries from a guarantor. I would prefer to see FCRL handle it and keep a close watch for a fee, rather than it just run on with fingers crossed as collections under RBR with the standard 1%. On 4907 (which is the only loan I have in this position) FC did not take the problem seriously enough at first, IMO, until it went into administration. My difference from Captain Confident is not that great - once you accept that a loan being repaid by a guarantor can be defaulted and sometimes should be. FC sometimes gets it right.