London Capital and Finance

paulus999

This was excellent and detailed.

Like many - who may be seduced by the excellent website set up by LCF and of course the headlining interest rates topping the chart on best-savings-rate.co.uk which took me to the webpage in the first place - are doubts that it sounds too good to be true.
The big problem is that this should NOT be listed as a 'savings' product in the conventional sense. It offers no safety net in the context of the £85,000 FSCS offered by banks - therefore its very inclusion on such a webpage is questionable and misleading.
Per annum Interest is paid at 3.9%, 6.5% and 8% on investments over 1,2,3 years.
Interest is paid into designated bank accounts yearly (1 year investment) or in four 6 monthly payments (6.5% - 2 year investment) or twelve quarterly payments (8% - 3 year investment).
You cannot withdraw early in any circumstances so the principal is at risk for the 1,2 or 3 years.
None of the positive feefo.com reviews indicate amount of investment, period of investment or whether (in nearly all cases) principal was returned promptly. Some quibble that tax on interest (20%) was deducted unlike a normal bank or building society account - which this is not.

Apparently LCF interest rates are funded by borrowers seeking capital repaid at 12 to 20% per annum.
The borrowers are supposed to provide proof of security - assets in the ratio of £100,000 for every £75,000 borrowed. If borrowers can comply with such why are they not negotiating better credit terms? Lending rates have been good because of the ongoing low base rate - but 12 to 20% is NOT good. The reality is that those securing capital at high interest are always going to have highest risk of defaulting on their repayments. LCF's business model sounds incredible and there is nothing of substance in available published financial sources to contradict this. Where is evidence of a portfolio of reliable borrowers? How much capital does LCF have to lend?

AGAIN. LCF do NOT provide SAVINGS products in any normal sense of the word IF- as others have commented - there is no FSCS (£85,000) safety net.
They sell high risk investments that should never be included on best-savings-rate.co.uk where I was initially seduced by the link. Their inclusion is both misleading and irresponsible.

jimjames

bail-in wrote: »

Global Security Trustees Ltd, Tunbridge Wells, (text removed by MSE Forum Team), a non-practising solicitor, has been suspended for a year.

I wonder why said solicitor is so wary about his name being in the public eye. The link still gives the name if anyone is interested

bail-in

I posted earlier about the practicalities of the low staffed virtual lending team of LC&F in carrying out the commercial lending business. Having spoken to other commercial lenders, it is possible with low single digit employee numbers to carry out lending re the loan numbers and over the period claimed by the LC&F website. I read that one of the biggest lenders in the UK only has eleven employees.

I also see that a similar SME lender charges much higher loan rates than LC&F, between 30-40% APR as compared to the LC&F 12-20% rate.

However, the fact that it is difficult to get any info about the LC&F lending team holds. The evidential nondisclosure to LC&F customers of details of SME borrowers also applies to introducers including IFAs. LC&F will not provide evidence of the SME commercial lending business to introducers.

Other commercial lenders will not provide names of their customers according to commercial contractual terms, although many commercial websites have the logos of their clients as business promotional aids. Like other commercial websites LC&F could provide anonymised data on the SME borrowers on the LC&F website. Although this would be more work for them considering the low staff numbers, and investors are being attracted in without such info.

firestone

the way you turn a negative into a positive a job in politics beckons

Reaper

firestone wrote: »

the way you turn a negative into a positive a job in politics beckons

There seems to be a misconception amongst many that Bail-In is a supporter of LCF. He isn't. He has also uncovered one of two interesting snippets though you need to be a pretty dedicated and patient reader to spot them!

AnotherJoe

bail-in has a strange obsession with LC&F and also seems to believe that the longer a post is, the more persuasive it is.

It isn't.

Malthusian

Bail-in isn't trying to persuade or dissuade anyone, anyone open to reasoned persuasion has already run away from London Capital & Finance long before they reach Bail-in's posts.

What I believe he is trying to do is play detective and uncover hard evidence that London Capital & Finance is failing to generate sufficient returns from its SME lending to sustain the promised returns to bondholders. If London Capital & Finance is not consistently generating sufficient external revenue to pay income and capital as they fall due, it would follow that London Capital & Finance is paying off existing investors using the only other source of money it has, which is new investors' money.

There is however no evidence that LC&F has insufficient external revenue to pay its bondholders. Playing Internet detective can be fun (for those of a certain mindset) but is usually futile. There is no smoking gun. LC&F is an unregulated investment. It has no obligation to provide details of its lending activities. If people want to invest in loan notes without doing due diligence it's a free country.

paulus999

" it would follow that London Capital & Finance is paying off existing investors using the only other source of money it has, which is new investors' money."


LCF's business is to sell invested moneys at a return interest of 12-20%. Interested to know how they determine specific actual repayment rate. Based on amount borrowed? Amount of security? Credit worthiness? Afterall 12-20% is vague and borrowers would want specifics up front.
If the security they request has sufficient due diligence done to honour their claim that no borrowers have so far defaulted - then surely many of these worthy and well managed and astute borrowers could and should have obtained better credit terms - maybe from conventional lenders.
It does lend credibility to the idea that LCF with its well set out web pages and credible claims of high returns is some kind of ponzi scheme where new investors are very likely sourcing the capital to pay earlier investors - and at some point this 'plc' will have nobody available to return calls when funds dry up or are siphoned off.

firestone

Reaper wrote: »

There seems to be a misconception amongst many that Bail-In is a supporter of LCF. He isn't. He has also uncovered one of two interesting snippets though you need to be a pretty dedicated and patient reader to spot them!

Have read the posts and while i would agree most are balanced and don't push the product and i have no knowledge of LCF good or bad it seems sometimes the negative becomes a positive very subtly.I.E the post from this morning in sections could be read as -
have asked before do they have enough staff -answer yes
others offer 30 - 40% they only offer 12% - so suggests that's a good thing
and the last line tells us investors are being attracted in

but your right it could all be true and a matter of perception and yes they are a good read

bowlhead99

bail-in wrote: »

Some investors think and act more carefully than others, especially when their entire invested capital is at risk.

Do you think it is worth writing to the CEO to inform him of that fact? That he is unaware that some people are more careful than others

Surely your statement, suggesting that only some investors are more careful than others, just serves to confirm to him that "some investors think and act less carefully than others", thereby providing little incentive for him to produce more detailed information because a whole bunch of people will just give him the money anyway without bothering to ask searching questions.

It may be some of the investors in the recent failed Providence Bonds and Secured Energy Bonds are now wondering in hindsight where things went wrong, when audited accounts did not point to the misuse of capital and imminent failure resulting in total losses to the bondholders."

Yes, I expect that "it may be". I wouldn't be surprised if it is the case.

But musings such as that, which don't even go so far as to be a rhetorical question - let alone an actual question, or demand - to the CEO, are just doing what you do in your "reviews": padding for the sake of adding to the word count and your ego, as part of trying to get people to think you are clever, credible and to be respected.

I am not known in this forum for my brevity either. And I recognise that what one may put in an "open letter" to the CEO may be different to what would be put in an actual direct letter to the CEO - as maybe there's an element of wanting to play to the crowd or giving a backstory for the benefit of the readership to whom you promote your blog. But your "letter" contains a lot of padding.

I took a look at the letter. The thrust of the opening paragraphs seems to be that you asked for info on the borrowers and we given the brush-off, as the person to whom you'd asked the question cited data protection. They didn't know, or didn't want to divulge, the names and information of their borrowers. Confidentiality is a standard reason not to tell people about your contracts and transactions with others. If your counterparties have some expectation of privacy and, likely, a commercial agreement or contract protecting the confidentiality of their data, you shouldn't just give it wilt nilly to an "author and rights campaigner" to help you raise as much money as possible.

But you seem to have "gone off on one" in your letter on the basis that their borrowers are corporates rather than "living individuals":

bail_in's_blog_letter wrote:

There may be civil commercial law contractual confidentiality terms in your B2B loan contracts preventing company information disclosure. However, "data confidentiality" has not been stated by LC&F operations and Surge staff as the reason for the commercial lending information nondisclosure. Rather it is stated as "data protection" and this is a specific term usually referring to regulations re data storage applying to living individuals by the DPA 1998 and overseen by the ICO.

If you have any doubt please let me know which section of the DPA 1998 your compliance officer is relying on for your non-disclosure of SME borrower corporate information

It's a silly line of enquiry. They said they are not telling you about their borrowers due to needing to protect the relevant data, and you acknowledge that "there may be civil commercial law contractual confidentiality terms in your B2B loan contracts preventing company information disclosure". So that's it, end of. Why break their confidentiality agreements to encourage you to invest, when other people will invest anyway?

But then you rant for a bit about the difference between 'data confidentiality' and 'data protection'.To a layman they are the same and to a lawyer they are not. But ok, let's say the misinformed representative used the wrong term and thet meant confidentiality, and giving you the info would merely violate their contractual (commercial civil law) obligations rather than actually break a Data Protection Act or GDPR obligation. Would you respect a company that breaks its contractual (commercial civil law) obligations to its clients?

The question of data protection rather than data confidentially is moot anyway, given they don't have to give you the info if they don't want to and failing to disclose stuff to you doesn't irreparably damage their fundraising. So they don't need to tell you what clause of what DPA their "compliance officer" is "relying on" to avoid giving it to you. They could have just told you they don't want to, and don't want your money. Maybe they think if they give an excuse that sounds reasonable to a layman, you'd invest anyway.

It's like if I'm fundraising and you come to me and demand that I make you a sandwich to encourage you to invest in my business. I might cite "health and safety" as a reason not to do it - I don't want to poison you with my poor hygiene or bad culinary skills. Then you argue for a while and want to know what specific line of what publication by HSE is a barrier to your getting a sandwich from me. Eventually what it might come down to is that I simply don't want to make a sandwich for a lawyer / author / rights activist as part of my fundraising because on balance, the consequences might be negative, and am under no obligation to make you one.

If the consequence to my not making you a sandwich is that you write a scathing "open letter" commentary on your anonymous blog about how I don't know health and safety law inside out, so be it. My business model doesn't promote my knowledge of health and safety law.

As I implied, I'm no stranger to verbose forum posts but I hope you find the insight and analogies useful.