sg
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Post by sg on Feb 28, 2017 11:18:28 GMT
I have been in p2p lending now for just over 18 months and for most of this time I have been looking forward to the FCA full authorizations coming through. I saw this as a means to force the p2p platforms to be more open and clear on the way they did business. The recent full authorization of ReBS has shocked me somewhat and I am now rethinking that expectation.
When I first looked at p2p I examined as closely as I could the platforms that I thought would suit me with the intention of using five of them to invest, ReBS was one of those I looked at, and I was surprised at the lack of transparency in the whole thing. I had envisaged the platforms would act somewhat like syndicate managers and pass on all relevant information, what I found was that most of them were opaque to varying degrees and the whole thing ran on a "Trust me, I'm a p2p platform" basis !!
I ended up placing a much smaller amount than intended on two platforms, which has now grown to five as I have seen new platforms that were worth trying. The total amount is only now at half what I had intended to place, and if anything it's going down as I am now totally out of one of my original two and unless things change am headed out of the other one.
It always seemed to me that if it was my money at risk then I should have sight of all the contracts involved, all the valuations, "buy-back" agreements, underwriting of loans, etc. Also that the default conditions, and the steps to be taken to recover were all contractual and visible. Also that the risks were being correctly assessed and the interest offered bore some correlation to those risks and not simply supply and demand of money. Also the terms of the loan would be invariable for both the lender and borrower for the length of that loan. Also where loans were being rolled over, renewed, or restructured I should have the payment history on those loans to determine the likely outcome.
I could go on (and on) but thats the general expectation I did have but I have yet to discover any platform that comes close to meeting those conditions, although some are close enough that I will invest some money. I may be being optimistic about the FCA authorization process addressing all of those issues, but it seems from the ReBS authorization that they are addressing none of them. Now I may be judging ReBS on what I found 18 months ago and they may have changed completely (please let me know) but a brief scan of their website and this forum doesn't give me any confidence that is the case.
What do other users think, particularly those with experience of the authorization process, am I expecting too much ? Should I expect anything at all to improve because of this process ? Am I misjudging ReBS and extrapolating from that into a pessimistic view ?
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pom
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Post by pom on Feb 28, 2017 13:19:28 GMT
Expecting too much? Quite probably. It's definitely a step in the right direction and the good platforms will use it to improve and develop staying well within the spirit of the regs for the benefit of everyone. But there will always be limits as to how much protection it'll really give us and there will undoubtedly be some platforms that thru increased growth (ie too many employees rather than people for whom the biz is their baby) or just plain greed will probably push limits on the regulations as far as they can go without getting slapped with fines. (PS I've never used rebs, so no idea what they might be like) Cynical? Yup probably. A few years ago I was part of a team brought into a bank to do a design review that their regulators were insisting on (having previously slapped them hard when the previous systems failed badly)....Ended up having a big ugly argument about a glaringly obvious risk, but they'd already decided what they were going to do, just wanted us to rubber stamp them. Can't actually remember if I was even allowed to include that bit in the report.. lost all interest in working with banks anyway....And have steered well clear of this one ever since, won't bank with them or any subsidiaries, sold shares I inherited the second probate cleared and even avoid their ATMs if at all possible. OTT? Undoubtedly - I'm certainly not naive enough to think similar stuff doesn't go on elsewhere, but this one was a personal affront to my professionalism given I had zero to gain, and particularly as I'd been working with them for years and so refusing them business is a nice bit of petty fun  |
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nick
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Post by nick on Feb 28, 2017 14:14:28 GMT
Am I (we) expecting too much from FCA authorization? Undoubtedly yes.
However, authorisation and regulation by the FCA does help ensure that the people operating the platforms are appropriately qualified and experienced screen out rogues. It also ensure that the platforms are obliged to ensure, amongst other things, that they have adequate systems and controls commensurate with the risks of the business and adhere to its high level standards and the detail of the FCA Handbook. What is does not ensure, is that these obligations are necessarily met which all so often only comes to light when things go wrong. So whilst regulation is welcome and should lessen the risk of incompetent management / lack of control / undesirables involved in the business, it won't eliminate these risks nor will it eliminate poor judgement by platforms in how they run their business.
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sg
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Post by sg on Feb 28, 2017 15:02:31 GMT
Thanks for the contributions guys, unfortunately you all seem to agree that I was expecting too much of the FCA, which is a shame really. It would have been nice if somebody could clean up this industry before there is a major blood-letting, which seems inevitable somewhere down the line. @magenta14 - Thats kind of how I evaluate the platforms now, I just wish I didn't have to, it's a lot of work and requires constant monitoring as things change quickly. One of my original platforms was SS and I was pleased enough until last May when I got an email saying they were changing how they paid out interest on defaulted loans (ie accrueing but not paying) - shortly followed (what a coincidence) by a major loan default which is still playing out. I see that as a unilateral change of the terms of an existing contract to SS's advantage and would be very unhappy if I was in that loan, I would have thought that was against any FCA guidelines and even against basic contract law. I have since completely changed my opinion on SS due to ongoing similar changes to there benefit, but this requires almost weekly monitoring of the situation. nick - Having been through many ISO9001 audits I know that ongoing regulation is often not that rigourous, but certainly for that, the initial creditation is a fairly comprehensive procedure. I guess I was hoping that similar existed in gaining the initial FCA authorisation if not in the ongoing regulation. |
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Feb 28, 2017 16:19:12 GMT
ISO9001 accreditation, that brings back some memories. A bureaucratic monster of no use to man or beast. I once worked in a technical department, and in order to be ISO 9001 compliant we had to stick labels on every manual we possessed, stating "This manual does not conform to ISO9001 standards". Failure to apply the sticky label was a disciplinary offence.
If FCA regulation is similar, then every ReBs loan should have a "sticky label" stating, "This loan is to a disreputable borrower who may disappear"
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am
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Post by am on Feb 28, 2017 20:52:27 GMT
ISO9001 accreditation, that brings back some memories. A bureaucratic monster of no use to man or beast. I once worked in a technical department, and in order to be ISO 9001 compliant we had to stick labels on every manual we possessed, stating "This manual does not conform to ISO9001 standards". Failure to apply the sticky label was a disciplinary offence. If FCA regulation is similar, then every ReBs loan should have a "sticky label" stating, "This loan is to a disreputable borrower who may disappear"In fairness ReBS do have some very good loans on their books But with at least 2 in 10 SME's failing during their 1st five years of trading it can present the less able perhaps less savvy lender with a huge issue as to which applications to lend into, what to buy on the SM, what price to pay And when to sell their holdings to reduce risk and maximise returns. One could reasonably argue that many lenders are woefully ill equipped to make such complex, long term P2B financial lending decisions. Holding 10 different loans is no guarantee in delivering success because If you have chosen very poorly all 10 could go sour, it is essential therefor that one really knows what's, what when lending in support of SME's and have the time and ability to 'garden' that carefully selected SME loan portfolio. I looked at ReBS a few years back. My interpretation was that their offering was focused on "rescue loans" (loans to companies in financial trouble to enable them to trade through their difficulties). My conclusion was that there was a high risk of default, and at a lot of diversification would be needed to reduce the risks. I therefore eschewed lending though ReBS. I suppose my question should now be is ReBS worth another look now that they have (I presume) a higher deal flow, and bank and building society interest rates are even lower.
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ozboy
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Mine's a Large One! (Snigger, snigger .......)
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Post by ozboy on Feb 28, 2017 21:02:51 GMT
I've said it before elsewhere on this site, FCA Accreditation will make VERY little, if any, noticeable difference - it means Jack S**t.
Look at the litany of past failures of all the preceding "Regulatory Bodies" who were supposed to "protect" Consumers and marvel at how gobsmackingly inept and asleep at the wheel they have all been.
And the FCA is exactly the same.
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JamesFrance
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Port Grimaud 1974
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Post by JamesFrance on Mar 1, 2017 10:28:25 GMT
I would guess that the main effect of FCA regulation so far has been a massive increase in overheads for P2P platforms, which can only result in lower returns for investors, thus increasing the risk of losing money.
The public sector weighs heavily on private enterprise but rarely adds value.
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sg
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Post by sg on Mar 1, 2017 10:29:36 GMT
The problem is there's also
f) Repeat steps a to e on a weekly basis to keep up with changes.
A year ago the only problem I saw with SS was how to get enough in pre-funding. Everything else was rosy, the last 9 months has been one change after another, none for the better.
Multiply that by five platforms and it's a lot of work and requires close attention at frequent intervals. I kind of hoped that FCA authorization would push those intervals out to six months or so, at least.
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Post by stevefindlay on Mar 1, 2017 17:55:40 GMT
You may like to see our detailed post on this topic: www.bondmason.com/will-fca-regulation-be-the-saviour-p2p-lendingWith a key extract from that post being: 'just because a platform is FCA regulated doesn’t guarantee good returns, for example; - Regulation doesn’t guarantee the quality of credit / pricing - Regulatory hurdles aren’t significant for the simpler P2P lending models and barriers to entry remain low for new participants - The quality of platform operators is, and remains mixed – some are very good, some are less experienced' You can draw an analogy to fund managers here - just because a fund manager has FCA approval doesn't mean they will all deliver good returns. |
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sg
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Post by sg on Mar 1, 2017 21:51:00 GMT
stevefindlay - it's not good returns that worry me, it the disclosure of information. If I go to the bank for a loan they want to know everything pertinent, and a whole lot else, in p2p we are the bank, it's our money that's at stake and we need to know everything pertinent. The trouble is that we aren't given it and can't in some cases get it, and in other cases are not aware of it. The platforms are not acting as agents to set up a deal but as distributors of an already negotiated deal and holding a lot of cards very close. Such things as contracts, valuation reports, survey reports, progress reports, buy back agreements, underwriting deals, etc should all be available as a matter of course. Various platforms make some of this available, different for each platform with different excuses as to the documents held back. The main excuse being commercial sensitivity, but I'm afraid that doesn't wash, that's part of the price of borrowing from p2p, the borrower is actually borrowing money from a number of people, each of whom is entitled to all pertinent information. This sort of thing all boils down to the platforms operating on a "Trust me, I'm telling you the truth, honest" basis, rather than a clear contractual and documented basis. It was this opaque practice that I hoped would be addressed by the FCA. Whilst on one hand the platforms are emphasising that we must do our own DD they are refusing information that would allow us to do that. All the risk appears to be on us, none on the platforms, and in a number of cases, none on the borrower either. I think that the current flood of money coming into p2p is distorting the market and allowing platforms to get away with practices that would otherwise cause investors to be wary. Again I would have hoped that the FCA would address that. Seems like I've expected too much and I will just have to keep my investments at a lowish level and as diversified as I can and see what happens in the longer run.
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sg
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Post by sg on Mar 1, 2017 22:02:43 GMT
Also - I didn't say Fund manager, it was Syndicate manager, I was thinking of insurance syndicates, where the manager operates on behalf of the Syndicate and in a lot of cases has skin in the game themselves. I'm not looking for somebody to manage the investment, I'm looking to the platforms to obtain and present investment with risk opportunities for investors to assess and take advantage of, for which they take a fee and a %. To do that they should completely disclose all pertinent information.
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Post by stevefindlay on Mar 1, 2017 23:21:04 GMT
sg I think we are both thinking about this the same way - there is a wide range of operating models and practices run by a wide range of teams (in terms of experience, investor alignment etc). Transparency of information pertaining to each opportunity is important (of course it is) but it must also be considered in the context of the quality and approach of each platform in each case. Some platforms operate mainly as brokers-taking very little ownership of the credit and pricing, which may be fine, but in these cases there should be a very full disclosure of each opportunity. Other platforms take much more ownership over the credit filtering and assessment, and clients may be able to get comfort with more summative information on each deal. I think the FCA, and market participants (lenders) are grappling with these different approaches and the requirements for each. P2P Lending is not homogeneous and there is still a way to go as this asset class matures. Caveat emptor applies.
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