Peer-to-peer lending sites: MSE guide discussion

masonic

E&G wrote: »

On the other hand, Lendy has been a relatively expensive mistake. I pulled 5k from my S&S ISA for diversity's sake and because I thought there may be a wee downturn which hasn't arrived, and put it into Lendy across a number of loans. And it's been a terrible experience. I've taken everything I could out but still have about £1200 tied up with loans which will never likely get repaid (or lost when taking severe haircuts)

Yes, the warning signs were there a long time ago. It's a shame you didn't see my comments in this thread as I could have saved you the hassle. This used to be my favourite platform, but I took the decision to liquidate my holdings and remove my money from the platform in early February 2017. Because of my early exit, I never lost a penny, and during the rest of 2017 I watched from the sidelines as things got worse and worse, all the time warning people here about the developing issues.

I've been caught out elsewhere though.

taylornj

masonic wrote: »

Yes, the warning signs were there a long time ago. It's a shame you didn't see my comments in this thread as I could have saved you the hassle. This used to be my favourite platform, but I took the decision to liquidate my holdings and remove my money from the platform in early February 2017. Because of my early exit, I never lost a penny, and during the rest of 2017 I watched from the sidelines as things got worse and worse, all the time warning people here about the developing issues.

I've been caught out elsewhere though.

I started my exit from Lendy in Jan 2017, it took me until Sep 2017 to exit fully when the final monthly interest was paid. Since then had a balance of £0.



I do look in and do the calculations (loans not paying interest + non-performing loans + amount being recovered) / loan book = 52.47% Back in August 2017 that looked bad at under 30%. As last e-mail from Lendy, they seem happy at £6m repaid in the month, problem is my figures say they need to be getting £6m repaid each week if not more. 6 loans > 660 days overdue (non-performing/defaulted).



My exit might have been slow to start with, as I waited on new loans appearing elsewhere to replace Lendy Loans. Some issue with sales queues, I only had loans up for sale on the same day, cancelling sale before midnight. Only two small loans parts up for sale ran into the next day. In the end all capital was paid back and had my interest, with a 12.76% return, that includes holding some loans with 8% and 10% rates - 12% reinvested monthly should give around 12.68% the extra is due to Invest Now Pay Later, which Lendy stopped.


Happy with the end result at Lendy, and glad to be out of Lendy. I see no reasons to return. There are also the IT faults in the platform, and still haven't addressed withdrawals processing.

E&G

Wish I'd seen it masonic. I cottoned on about April/May of last year that loans were looking ropey and that they were lending way beyond what a realistic valuation (of a distressed asset, at least) would be. Lesson learned: a 12% return really is too good to be true and in truth I knew that - robust businesses that deliver don't need to borrow at 18% - but I thought I could play the market and pick out the sure things but that's clearly not the case.

For me, the Ratesetter model is about as risky as peer to peer should be: some mitigated risk for a bit if an extra return on cash. If there's anywhere advertising double digit returns then there's likely to be significant downside with only limited upside, and your money would be far better in the stock market.

Malthusian

An investment where your returns depend on how early you get out is either a scam or merely broken.

masonic

E&G wrote: »

Lesson learned: a 12% return really is too good to be true and in truth I knew that - robust businesses that deliver don't need to borrow at 18% - but I thought I could play the market and pick out the sure things but that's clearly not the case.

Lendy is just one example of a platform paying and lending on those rates. Others have fared a lot better, although it should always be accepted that defaults will reduce the headline rate to something more in line with equities. With sufficient diversification (and careful loan selection) the loss potential does seem to be lower.

I still have reasonable confidence in Moneything and Ablrate, and I still use FundingSecure although I am very selective there.

For me, the Ratesetter model is about as risky as peer to peer should be: some mitigated risk for a bit if an extra return on cash. If there's anywhere advertising double digit returns then there's likely to be significant downside with only limited upside, and your money would be far better in the stock market.

I pulled all of my money out of Ratesetter too when they changed their terms. I'm concerned about some of their lending practices. There is no transparency and the risk is currently being masked by their provision fund, which didn't look sustainable at my last check. TBH, I prefer the cash-blend accounts over at Assetz Capital, although there is some lack of clarity around those accounts too.

I'm using P2P as an uncorrelated asset class, with the bulk of my investments in equities. It allows me to avoid holding cash outside of high interest current accounts and to keep my exposure to bond funds reasonably low.

jamesd

E&G wrote: »

For me, the Ratesetter model is about as risky as peer to peer should be: some mitigated risk for a bit if an extra return on cash. If there's anywhere advertising double digit returns then there's likely to be significant downside with only limited upside, and your money would be far better in the stock market.

The problem is more that specific platform.

jamesd

masonic wrote: »

I still have reasonable confidence in Moneything and Ablrate, and I still use FundingSecure although I am very selective there.

Regrettably, it seems likely that I'll eventually end up recommending against using Moneythhing on ethics grounds, shaped in part by:

1. them planning to mislead secondary market buyers about the true risk level of loans by not disclosing promptly that payments are late. A bonus gagging clause banning lenders from disclosing it as well, that I believe to be unlawful in consumer contracts as a breach of unfair terms legislation. And I see no way for them deliberately withholding material risk information to be treating customers fairly.

2. the new user agreement that's so riddled with terms that appear unlawful to me that it's a good example of what firms aren't allowed to do. But for health reasons I'm just not up to discussing this utter mess with them. A particularly bad joke is the legal tautology of the clause requiring consumers to assert that the terms are lawful when the OFT opined that terms like that which require consumers to use professional expertise that they can't be expected to have are unlawful breaches of consumer contracts law. It's almost as though someone read the OFT and FCA unfair terms guidance and decided to use it as a template for things to do instead of things that they must not do.

3. the Birkenhead loan mess where Moneything must have known about the developer's overspending default on their loan but didn't disclose this key risk information to lenders after it's certain that one of their now-former directors had it. Had they and the borrower (with 5% first loss, not the developer) made timely and proper disclosure I'd have had nothing invested in this loan.

While the terms mess is a problem, the failure to disclose material risk information is more worrying. And doing it systematically with late payments going forward rather than something that could be thought of as a past mistake is particularly so.

For the moment I'm waiting to see whether there's any useful acceptance by borrower (not developer) and platform that that they materially misled lenders about the risk in the Birkenhead case. That one will inevitably go at least to the FOS if lenders who believe they were misled lose money and there is no such acceptance after complaint to the platform.

I'm still hoping that they will change approach instead of seeming to try to reverse their good start.

masonic

jamesd wrote: »

1. them planning to mislead secondary market buyers about the true risk level of loans by not disclosing promptly that payments are late.

The 14 calendar day 'tolerance period' is not ideal and I would have preferred a record of the date payments fell due and were received as we see on other platforms, but this wasn't of significant concern to me.

A bonus gagging clause banning lenders from disclosing it as well, that I believe to be unlawful in consumer contracts as a breach of unfair terms legislation.

I don't believe there is such a clause. The statement about non-performing loans refers to clause 19 suggesting late payments can be discussed providing you don't reveal the identity of the borrower and appears to be in relation only to information provided by MT, not information obtained independently.

For example, I don't believe there is anything stopping me sharing in public that MT loan XXX123 keeps slipping into non-performing status, so the borrower might be struggling to keep up interest payments.

I do have a problem with not being able to disclose the identity of a MT borrower when that information is in the public domain, for example by way of a legal charge registered at CH, especially when a non-lender can do so freely.

A particularly bad joke is the legal tautology of the clause requiring consumers to assert that the terms are lawful when the OFT opined that terms like that which require consumers to use professional expertise that they can't be expected to have are unlawful breaches of consumer contracts law. It's almost as though someone read the OFT and FCA unfair terms guidance and decided to use it as a template for things to do instead of things that they must not do.

Perhaps I missed the bit in the terms requiring me to assert they are lawful?

3. the Birkenhead loan mess where Moneything must have known about the developer's overspending default on their loan but didn't disclose this key risk information to lenders after it's certain that one of their now-former directors had it. Had they and the borrower (with 5% first loss, not the developer) made timely and proper disclosure I'd have had nothing invested in this loan.

I've not been involved in Birkenhead and, unusually, didn't put my usual £1 "don't go there" stake in any of the loans. So I may have missed out on some of the aspects of this default shared with lenders. I need to do some further reading of discussion around this as I've been blissfully unaware of this situation.

E&G

Given your views on Lendy and your response to Masonic, where would you advise for peer to peer saving then James?

(I am also getting out of Ratesetter given the additional risks and losses they incurred last year, but given the fees for early release am auto-withdrawing - just the four years to go!)

Malthusian

E&G wrote: »

Given your views on Lendy and your response to Masonic, where would you advise for peer to peer saving then James?

Bear in mind that wherever James advises you to put your money, he will advising you to get the hell out of in a year or two, as happened with Lendy (nee Savingstream) and Collateral.