RateSetter risky?

masonic

GiddyInvestor wrote: »

My position is that I don’t trust RS at the moment as they are insufficiently transparent. The default rate of small loans to many people for phones are easily estimated but property loans are where you get into dangerous positions.
If RS went to a Stabilisation event they are finished and I suspect Rhydian Lewis would use every justification he could think of to not make that move. I love the idea of RS and want to return but need evidence of stability rather than obfuscation.

I'm in full agreement regarding lack of transparency, and it is clear from past misdeeds that it should not be trusted as far as loan origination is concerned. This is one reason I wouldn't lend at market rate (which at times is around 3% for the 5 year market) and require a significantly better rate for the risk I believe I am taking on.

I've heard the argument that declaring a Stabilisation event would be tantamount to the end of the platform before, but I'm not convinced. While I see the logic behind it - that a large cohort of RS investors are naively confusing the platform with a savings account and have been conditioned on statements of "not a penny lost" to believe that such an event should not happen - I think there is an element of hyperbole in such claims. Presumably the management of RS doesn't believe it would spell the end of the platform, or they would have just kept the original "Resolution event" in which the platform was wound down in such circumstances, rather than putting a lot of noses out of joint by making the provision fund discretionary and waiving exit fees for those of us who objected strongly enough to disinvest.

As it is, it would probably be better if the provision fund were abolished and the markets run more like a collective investment scheme where investors received a single market rate and spread the risk of defaults without the false sense of security the current model affords. Given the FCA's dislike of provision funds, this might be a forced reality one day.