Discussion
Badda said:
You’re not surprised though surely? Sorry to hear the news regardless.
It did come as a complete surprise. I invested in a number of P2P platforms a few years ago, only a few hundred pounds in each, and then left them to it. To get a letter from a law firm saying that a borrower is claiming I'm partly liable for a £14m claim, is pretty much the opposite of what I signed up for.anonymous said:
[redacted]
I just checked and my total exposure to this loan is £10. All of this hassle over a bloody tenner.I doubt this borrower has a legal case here and it's just scare tactics to get the Lendy investors to turn the screw on them settling. If they did win and all Lendy investors had to pay up then it would be huge and would change the P2P game entirely.
DonkeyApple said:
This is what you need to focus on. What you are looking at is a possible (not even guaranteed) return of 5% from placing your capital 100% at risk.
How does that even begin to compete against 1% guaranteed return with zero capital at risk?
It can’t. It is a genuinely awful deal by comparison.
So if this is such a shockingly bad deal that absolutely no person who comprehends the value of money would entertain why has it found traction within the retail investment community?
It is because the average human thinks that 5 is better than 1 and then takes that thought process no further. And business models can play on this human weakness, exploit it and make profits for a period of time that is typically defined by the duration of an economic cycle.
Here’s the deal:
You can lend me £100 and I will absolutely guarantee to return to you in 12 months time that £100 plus £1 for your effort. It’s set in stone. Absolutely nothing can go wrong.
Or, you can lend that £100 to a chap who lives in Panama that you’ve never met, have no clue who he is let alone how much he is worth. He will take your £100 and at the end of 12 months he may return none of that. £100 and pay you none of the £5 for your trouble. There is a chance that he may return the full £100 and pay you the £5 he said he would try and pay you.
Which is the better deal? The one with guaranteed security of capital, guaranteed payment of agreed interest and governed entirely and wholly by U.K. law and where you know exactly who your counter party is. Or the one where your money instantly goes to some entity you have no knowledge, control over or understanding of and where in twelve months time there is no guarantee that you’ll ever see any of your £100 again let alone this weird promise of possibly getting an extra £5 for your troubles?
There is an extremely good reason as to why the FCA does not permit this punting enterprise to be covered by the FSCS and why all the banks and brokers who pay into that scheme to cover everyone will not permit them to join. The likelihood of them claiming against the FSCS is a near certainty in the first instance and in the second, having access to a real pot of secure funds through which to guarantee client money would simply open the flood gates to unprecedented levels of reckless lending that is only current held under control by the relatively limited number of punters willing to bet everything for an appallingly low upside potential.
I just wanted to say a massive thank you for this post as I was considering a chunk in Ratsetter or something similar because of the abysmal rates on offer with conventional savings.How does that even begin to compete against 1% guaranteed return with zero capital at risk?
It can’t. It is a genuinely awful deal by comparison.
So if this is such a shockingly bad deal that absolutely no person who comprehends the value of money would entertain why has it found traction within the retail investment community?
It is because the average human thinks that 5 is better than 1 and then takes that thought process no further. And business models can play on this human weakness, exploit it and make profits for a period of time that is typically defined by the duration of an economic cycle.
Here’s the deal:
You can lend me £100 and I will absolutely guarantee to return to you in 12 months time that £100 plus £1 for your effort. It’s set in stone. Absolutely nothing can go wrong.
Or, you can lend that £100 to a chap who lives in Panama that you’ve never met, have no clue who he is let alone how much he is worth. He will take your £100 and at the end of 12 months he may return none of that. £100 and pay you none of the £5 for your trouble. There is a chance that he may return the full £100 and pay you the £5 he said he would try and pay you.
Which is the better deal? The one with guaranteed security of capital, guaranteed payment of agreed interest and governed entirely and wholly by U.K. law and where you know exactly who your counter party is. Or the one where your money instantly goes to some entity you have no knowledge, control over or understanding of and where in twelve months time there is no guarantee that you’ll ever see any of your £100 again let alone this weird promise of possibly getting an extra £5 for your troubles?
There is an extremely good reason as to why the FCA does not permit this punting enterprise to be covered by the FSCS and why all the banks and brokers who pay into that scheme to cover everyone will not permit them to join. The likelihood of them claiming against the FSCS is a near certainty in the first instance and in the second, having access to a real pot of secure funds through which to guarantee client money would simply open the flood gates to unprecedented levels of reckless lending that is only current held under control by the relatively limited number of punters willing to bet everything for an appallingly low upside potential.
You post has illustrated why this is.
I may still put a much smaller amount into Ratesetter but will view it as "a punt".
Thanks
DonkeyApple said:
I’m glad if it has caused anyone to think twice and to reevaluate the true risks. But I was clearly wrong in my statement that 100% of the capital is at risk as it is beginning to look like it’s more than 100%!
With this (and similar) 'investments', there have been a number of people keen to highlight that you were 'wrong' purely on the basis that they'd received interest for the previous x years! Suddenly, facing a significant loss of capital, those interest payment don't look so generous!Whilst many people on here appear to understand return, very few appear to understand risk!
Caterham.lover said:
DonkeyApple said:
I’m glad if it has caused anyone to think twice and to reevaluate the true risks. But I was clearly wrong in my statement that 100% of the capital is at risk as it is beginning to look like it’s more than 100%!
With this (and similar) 'investments', there have been a number of people keen to highlight that you were 'wrong' purely on the basis that they'd received interest for the previous x years! Suddenly, facing a significant loss of capital, those interest payment don't look so generous!Whilst many people on here appear to understand return, very few appear to understand risk!
Edited by selmahoose on Sunday 30th December 19:24
selmahoose said:
sidicks, that's just about as pointlessly stupid as saying that the many people who get/got both their interest and capital back from these 'investments' did so because they do understand risk.
'sidicks'?It really isn't. That would be the equivalent of betting all your money on red at a Roulette table, then because red came up saying that what you'd done wasn't risky.
I guess we'll put you down into the category of those who don't (fully) understand risk in this context.
Edited by Caterham.lover on Sunday 30th December 20:24
it REALLY is 
DonkeyApple said:
I’m glad if it has caused anyone to think twice and to reevaluate the true risks. But I was clearly wrong in my statement that 100% of the capital is at risk as it is beginning to look like it’s more than 100%!
Sensible, solid advice!Those looking for returns whispered about, should first play heads or tails with a friend and then buy a round with the winnings!
Over the years, the ‘provisions’ funds of P2P firms has been used by their marketing teams to sell ‘reassurance’ to their customers. It goes without saying that the funds were always far too small to be of any use other than as a marketing tool but for anyone interested, Lendy has apparently taken out a loan on their fund via Metro Bank according to the Torygraph.
https://www.telegraph.co.uk/investing/news/lendy-t...
https://www.telegraph.co.uk/investing/news/lendy-t...
Rather worrying. Are there any loans which aren't in trouble?
Luckily I got most of my money out before it went completely wrong, but still have a significant chunk in. How do people think it's going to end?
Also had some money on collateral, which I'm waiting to see if I ever see again.
Luckily I got most of my money out before it went completely wrong, but still have a significant chunk in. How do people think it's going to end?
Also had some money on collateral, which I'm waiting to see if I ever see again.
Sadly not. Lendy has gone. I wonder what the broader effect will be on the sector, if any:
https://www.ft.com/content/3ca77892-7e48-11e9-81d2...
https://www.ft.com/content/3ca77892-7e48-11e9-81d2...
Well that’s a few quid I’ve lost then, but it’s been on the cards for a while.
Just a shame that the two arrogant muppets who set up this business are now wealthy men, having burnt through millions of pounds of investors money. I hope the FCA and the administrators looks closely at their past actions.
Just a shame that the two arrogant muppets who set up this business are now wealthy men, having burnt through millions of pounds of investors money. I hope the FCA and the administrators looks closely at their past actions.
williaa68 said:
Sadly not. Lendy has gone. I wonder what the broader effect will be on the sector, if any
Indeed. We have a tiny punt with Kuflink: they say almost £48m invested, over investors and 0 losses to date.
Do appear well run to me, but we did have an email a couple of months back saying 2 of the properties we are invested in have “re-termed”......I was told this is fairly common, but it does raise questions....
0 losses to date.
That tells you that they are not collecting debts or enforcing loans.
It is impossible to run a loan book, let alone a higher risk loan book and not have a steady and predictable level of defaults that are simply part of the business model.
If they are saying that they have have zero defaults then what they are actually telling you is that they are not enforcing their loans. Which in turn tells borrowers that there is absolutely no purpose in or need to repay their loans.
That tells you that they are not collecting debts or enforcing loans.
It is impossible to run a loan book, let alone a higher risk loan book and not have a steady and predictable level of defaults that are simply part of the business model.
If they are saying that they have have zero defaults then what they are actually telling you is that they are not enforcing their loans. Which in turn tells borrowers that there is absolutely no purpose in or need to repay their loans.
"Investors should have seen through Lendy’s 12% promise"
https://www.ft.com/content/895d5ae8-aa09-11e9-984c...
"The links between a former football chair and a failed P2P lender"
https://www.ft.com/content/15a23a48-a9f9-11e9-984c...
https://www.ft.com/content/895d5ae8-aa09-11e9-984c...
"The links between a former football chair and a failed P2P lender"
https://www.ft.com/content/15a23a48-a9f9-11e9-984c...
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