Peer-to-peer lending sites: MSE guide discussion

grey_gym_sock

Malthusian wrote: »

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.

if you're thinking of putting money into p2p, a good question to ask yourself is: would you know what to do if jamesd stopped posting?

jamesd

masonic wrote: »

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.

My bold:

"12.1 We will inform you via the Platform if all or part of an interest payment or capital repayment due on a Loan is overdue by more than 14 calendar days. We will mark such Loan as “nonperforming” on the Platform. Until such time, a Loan will be “performing”. Such information is strictly private and confidential and you must comply with the provisions of clause 19 (Confidentiality) of these Terms in relation to such information and any other information we provide to you in relation to a Borrower."

The connecting word is "and". As it is, the fact of late payment seems to be "strictly private and confidential" as well as the clause 19 borrower naming restriction applying.

So far as I'm aware nobody subject to the April terms has yet done what you describe.

masonic wrote: »

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

My bold:

"7. YOUR REPRESENTATIONS & WARRANTIES
Representations and warranties are statements and promises made by you to us upon which we rely on being accurate in our dealings with you. Therefore, you make the following representations and warranties"

"7.11 Execution, delivery and performance of these Terms, each Loan Contract and (where applicable) each Security Document will not violate any law, ordinance, charter, by-law or rule applicable to you or the grantor of the same, or any other agreement by which you or such grantor are bound or by which any of your or their assets are affected; "

And of course none of us can make any meaningful representations about the loan contracts because MT just doesn't routinely provide them. Not sure either how we can know the future, "will not".

masonic wrote: »

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.

The developer overspending default, I think before the third tranche of the MT loans to the borrower (with 5% first loss, not the developer) first potentially became known to lenders in a report from the administrators, who also mentioned a history of overspending even before the first MT tranche. So far as I'm aware this was never disclosed by borrower or MT prior to the administrator doing it. That dramatically increased the potential for the developer to continue doing that and run out of money, which is what ultimately seems to have happened, through the builder telling the developer that they were stopping work. Those who bought the second loss tranches were particularly badly misled as the ones whose money was most exposed after the 5% first loss.

The relevant portion of the Administrator's proposals on page 1 is, redacted by me in bold:

"During quarter two in 2016, delays were experienced in the development works being progressed. Moreover, it became apparent that the development of the Property was underfunded and additional finance would be required. In September 2016, the Company refinanced its debt to Hope Capital through a refinance undertaken with Borrower. The Company granted security to Borrower equivalent to that previously granted to Hope Capital.

Borrower also agreed to provide additional development funding of £350,000 to the Company under a loan agreement dated 23 September 2016, on a secured basis, in order to allow the Company to complete the development works. Under an agreement dated 11 November 2016, Borrower agreed to provide additional development funding totalling £301,505 to assist with the completion of the development works at the Property. Under this agreement dated 11 November 2016, the Company acknowledged that an event of default had occurred under its original loan agreement dated 23 September 2016 and that the Company's loan facilities were now repayable on demand.

Events leading to the appointment of the Administrators

Notwithstanding the provision of the additional development funding provided by Borrower in November 2016, the Company continued to encounter further delays in completing the development works during the first quarter of 2017, with unexplained delays and growing uncertainty over the level of costs required to complete the development works and the realistic timeframe to reach practical completion.

In March/ April 2016, the Company was in dispute with Ridgemere in respect of works completed and monies owed. On 15 May 2017, Ridgemere issued a notice of intention to suspend performance under the contract dated 10 December 2015 as a result of the dispute. On 30 May 2017, Ridgemere suspended works at the Property due to the non-payment of an outstanding debt."

Ridgemere is the building firm contracted by the developer to do the work. The 11 November 2016 drawing was funded by the 22 November 2016 MT loan tranche.

jamesd

E&G wrote: »

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

I mentioned some possibilities here. Ablrate is in general the one I like best.

KTF

Not keen on Assetz Capital then?

jamesd

Malthusian wrote: »

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.

Earlier in this discussion masonic linked to a cautionary post they made on 4 Feb 2017. I'd recommended against using that platform in a post on 2 Aug 2016 and a range of others.

One thing I'm aware of is that people do pay attention to investments that I mention, as implied by grey gym sock's post after yours. So I may well change my views about an investment over time, and also change what I write about them here as my views change, generally saying why. The biggest example of that is me reducing my equity holdings greatly due to current market conditions..

However, you made this assertion, which appears to be false:

"as happened with Lendy (nee Savingstream) and Collateral"

To the best of my recollection I never recommended Lendy but suggested not using them and didn't recommend against Collateral. There was a time when I was considering using Lendy, though, and thought that they were worth investigating. I linked to my conclusion against earlier.

There was a time, though, when some use of Lendy would have been profitable, which changed over time, and I've no great issue with anyone who suggested using them during the first period and not in the second.

However, I have recommended Moneything and as you can see I'm considering changing that as a result of subsequent developments, chiefly whether I think that they can be trusted to promptly disclose all material risk information so that lenders can make proper risk decisions. Similarly, back in 2008 I probably recommended looking at Zopa and subsequently changed that as expected returns dropped.

On the Collateral end, investors were clearly misled by the entry with their name in the FCA register, including me. So for us the order described in FCA ordered to pay £22k for failing to update register is interesting. Whether this one will eventually go the same way is unknown.

While I don't provide any quality of service undertakings, what I suggest people consider is likely to continue to change over time as things change.

masonic

jamesd wrote: »

My bold:

"12.1 We will inform you via the Platform if all or part of an interest payment or capital repayment due on a Loan is overdue by more than 14 calendar days. We will mark such Loan as “nonperforming” on the Platform. Until such time, a Loan will be “performing”. Such information is strictly private and confidential and you must comply with the provisions of clause 19 (Confidentiality) of these Terms in relation to such information and any other information we provide to you in relation to a Borrower."

The connecting word is "and". As it is, the fact of late payment seems to be "strictly private and confidential" as well as the clause 19 borrower naming restriction applying.

So far as I'm aware nobody subject to the April terms has yet done what you describe.

My interpretation of that was that the requirement for privacy, confidentiality and clause 19 were "in relation to a Borrower" and non-identification of the borrower in any statement relating to non-performance would fulfil those conditions. However, I take your point about the alternative interpretation viz. that it is the information itself that is private and confidential and that, in addition, clause 19 applies to such information. Even though the latter is redundant.

"7. YOUR REPRESENTATIONS & WARRANTIES
Representations and warranties are statements and promises made by you to us upon which we rely on being accurate in our dealings with you. Therefore, you make the following representations and warranties"

"7.11 Execution, delivery and performance of these Terms, each Loan Contract and (where applicable) each Security Document will not violate any law, ordinance, charter, by-law or rule applicable to you or the grantor of the same, or any other agreement by which you or such grantor are bound or by which any of your or their assets are affected; "

And of course none of us can make any meaningful representations about the loan contracts because MT just doesn't routinely provide them. Not sure either how we can know the future, "will not".

I do wonder if MT is familiar with the plain English campaign. I probably read this in the manner intended (i.e. with an implicit "knowingly" in there). I agree with you, as written this is an unfair term and obviously would be struck from the agreement on challenge, which ironically is what it is inserted into the agreement in order to try to prevent.

The developer overspending default, I think before the third tranche of the MT loans to the borrower (with 5% first loss, not the developer) first potentially became known to lenders in a report from the administrators, who also mentioned a history of overspending even before the first MT tranche. So far as I'm aware this was never disclosed by borrower or MT prior to the administrator doing it.
<snip>

Yes, this is indeed very concerning.

masonic

I think this is worthy of mentioning here, for those who have not come across discussions in other forums:

A significant number of former investors in the Collateral P2P platform have received unsolicited emails from Huddle Capital. There are instances in which email addresses used were specifically created for use solely with Collateral.

Huddle Capital purportedly runs a legitimate P2P lending platform in the capacity of an Authorised Representative.

It appears that Huddle Capital is unlawfully collecting and processing data in contravention of the Data Protection Act 2018.

I am one of the affected data subjects.

As a general rule of thumb, if you are contacted out of the blue by a financial services company trying to sell you a product, there is a good chance such a firm is dodgy.

jamesd

Collateral loan 56 - number 28 in Wallsend - is being refinanced by Huddle Capital loan 1000070, which is currently still available for investment at 12%.

Nice to see some Collateral loan repayment activity. More apparently planned.

The emails mentioned by masonic appear to be somehow related to this, details not yet entirely clear. As administrator BDO may be able to use the Collateral mailing list, since that's a company asset, but this would be quite clumsily done if so, could instead have been sent as information or otherwise clearly identifying their involvement. So I doubt that BDO were involved.

Malthusian

jamesd wrote: »

To the best of my recollection I never recommended Lendy but suggested not using them and didn't recommend against Collateral. There was a time when I was considering using Lendy, though, and thought that they were worth investigating. I linked to my conclusion against earlier.

In my book something like this is a recommendation:

Surely you can do some P2P to get a higher income from it, without any significant stock market correlation, by using the firms like Ablrate (planes, shipping containers and some more varied things), MoneyThing (secured on pawned items, used car stock, supercars, stock lending, cars for leasing), SavingStream (secured on property being developed mainly). All of those pay in the region of 10-12% before bad debt for secured loans and have varying levels of security and other cover.

Or there was this (to a totally inexperienced investor who said they wanted something "safe and secure"):

Looking longer term, you can easily more than double your current income with only £50,000 using investing in a range of peer to peer firms. Places like Ablrate, MoneyThing and SavingStream provide rates in the 10-19% range and the investments are secured on physical property, from houses and land through pawned items and planes.

I could have chosen plenty of others.

If you are going to tell me that you were just mentioning SavingStream as an example and not recommending them, then we will have to agree to disagree. In my mind mentioning 3 specific P2P platforms out of the dozens of others available and mentioning returns of 10-19%pa is a recommendation.

It is all very well saying "the facts have changed so I changed my mind, what do you do sir". The fact is that most investors looking for a long-term, at-risk investment want somewhere they can reasonably expect to leave their capital to grow over at least the next five years, without having to watch constantly for warning signs so they can get out when the scheme starts creaking.

So if you are going to recommend something that might be good for a year or so but they'd better monitor your posts constantly so they know when to get out of it, as with SavingStream and Collateral and now MoneyThing, it would be prudent to say so from the start.

Any investment where those who get out early enough make money while those who don't see the warning signs (or read Jamesd's posts) lose money has one of the hallmarks of a Ponzi scheme. The most charitable interpretation is that the market is valuing the assets incorrectly and those who realise this earliest are legitimately making money out of their superior insight, as happens a million times a day on any other market.

The uncharitable interpretation is that investors put their money into junk bonds which are traded at inflated valuations (i.e. par). As long as new investors can be found to buy this junk at the inflated valuation, old investors can withdraw their money at a profit. When no more new investors can be found to buy the junk at the inflated valuations, the scheme collapses. This manifests as the secondary market seizing up, after which those who couldn't get out early enough have to wait and see what percentage of the loans ever get paid back. This is the scenario currently unfolding with Lendy.

If, as with Lendy, the scheme forbids investors from selling their bonds at anything other than par then the uncharitable interpretation becomes unavoidable. The charitable interpretation does not apply because there is not a genuine "market" if investors are forbidden from selling at below par.

masonic

jamesd wrote: »

My bold:

"12.1 We will inform you via the Platform if all or part of an interest payment or capital repayment due on a Loan is overdue by more than 14 calendar days. We will mark such Loan as !!!8220;nonperforming!!!8221; on the Platform. Until such time, a Loan will be !!!8220;performing!!!8221;. Such information is strictly private and confidential and you must comply with the provisions of clause 19 (Confidentiality) of these Terms in relation to such information and any other information we provide to you in relation to a Borrower."

The connecting word is "and". As it is, the fact of late payment seems to be "strictly private and confidential" as well as the clause 19 borrower naming restriction applying.

So far as I'm aware nobody subject to the April terms has yet done what you describe.

Coming back to the discussion of the new terms, I have posed the question in the P2PIF around 12.1 and whether it is intended to convey this meaning. The Q&A document suggests this is not the intention.

I've also done a casual search for the word "performing" in several of the recent loan-specific threads over on P2PIF and can see a few posters making statements about loans going in and out of non-performing status, including one of the forum administrators.

So I think some clarity would be welcomed. The easiest way to clarify would be to delete "private" if borrower confidentiality is all they are intending to protect.