CrowdProperty Can Now Buy Lenders Out At Any Time

CrowdProperty has just made a lot of changes to its terms and conditions.

Apart from simplifying them a lot – they really are an awful lot easier to read, which is great – there are substantive points that I want to bring to your attention.

CrowdProperty now refers to its wind-down plans in the event of going bust

It never used to refer to its wind-down plans in its terms and conditions, although it had provided information on its website.

Now, a few short paragraphs give some basic information on what it would do if it went bust (officially “insolvency”) or becomes “unable to operate”.

Basically, it says the ISA service provider it works with and its e-wallet provider are likely to, at least initially, continue to manage the ISA and cash sides of your account.

Plus, CrowdProperty itself will try to continue to manage loans and pass them to third parties if they have the right regulatory permission.

I think that P2P lending companies need to make it more clear for lenders in their wind-downs that, in an insolvency, it's not likely to be smooth sailing just because they have a “plan”.

Providers going bust while they close their online lending platforms have invariably in the past been handed over to specialist firms called administrators. These are slow to resolve outstanding loans, and they increase your costs while reducing your returns.

CrowdProperty doesn't mention any of that – but nor do any other providers that I know of.

What's unusual about this new section in its terms and conditions is that it doesn't state what its wind-down plan is if it decides to wind down by choice, i.e. while still being an active and profitable business.

A P2P lending provider might do that, for example, if its business is no longer quite successful enough and they want to call it a day. Or it might be that it sells the P2P arm.

Or it might decide to shift all lending to be funded by financial institutions, rather than part-funded by individuals through its online lending platform.

It's a shame that last point is not covered, since I currently consider CrowdProperty to be one of the more likely providers to do exactly that…

CrowdProperty can now buy you out at any time

…Potentially this other brand new item in its terms might be part of the plan to do that.

CrowdProperty now states it has the right at all times to buy some or all of your loans off you for the amount you paid for them plus all accrued interest. (But it won't buy you out at your request.)

You might think that sounds just fine for you. Maybe it is – if CrowdProperty just wants to close up all loans through its online lending platform in one go, for example, and leave individual lenders feeling well treated at the end.

However, think of this scenario: it decides to just buy your outstanding good loans and leave you with your bad ones.

That would mean that your good loans stop earning you further interest in future that you might actually need to help to cover any losses on your bad debts.

I wish it covered that point in the new terms.

Still, I suspect that if a P2P lending provider tried that trick you might have a reasonable complaint to the Financial Ombudsman Service and/or a claim in a County Court.

CrowdProperty quietly removes clause that financial institutions will not lend at better terms than you

The previous CrowdProperty terms stated that its financial institution partners, as well as CrowdProperty itself, would not lend to the same developers as you at better terms than you.

That whole section is completely gone in the new terms.

Obviously we'd prefer some actual transparency on what the story is now, rather than that information being quietly removed.

We at 4thWay are always more cautious when transparency goes backwards. An emotional impulse you might have is to be concerned. However, rationally speaking it's not really possible to read too much into this by itself.

It's not unusual in P2P lending for very wealthy individuals or financial institutions to get better terms than everyone else when lending. That's not just because they lend more, but because they provide services that are valuable to everyone.

For example, they sometimes offer facilities to cover any shortfall if a loan can't be completely filled. (This is called “underwriting”. Not to be confused with the other meaning of the word underwriting that you may be more familiar with, namely: the steps taken when approving or rejecting a loan and setting the interest rate.)

Another facility they often offer is prefunding loans completely so that borrowers get their money when they need it. They then re-sell loan parts to individual lenders afterwards.

Extra interest you'll earn (if at all) on late and defaulted loans is now not specified in the terms

The terms and conditions no longer specify that you'll get two percentage points extra interest per year from the point that a loan goes past the expected repayment date.

The new terms now just state that you might now get extra. But the amount, and the terms of when and you'll start to earn it, will be outlined in each individual loan offer document.

I think it far from ideal that this isn't all clear and up front across all loans. Especially with so many loans that are currently bad.

While we're on the subject of defaults, it now lays on extra thick the actions it can take without consulting lenders when a loan goes wrong. Potentially this is in response to complaints from lenders, when they haven't approved of the steps CrowdProperty's taken.

Less information on IFISAs

The main terms and conditions used to specify a bit more on your CrowdProperty IFISA. They explained how such things work as transfers of some of or all of your pot into or out of it. That's gone.

There's no reference to “step-in rights” any more

The new terms no longer refers to CrowdProperty having “step-in rights” to take over and run development projects that have gone south. That used to be one of CrowdProperty's selling points when it started.

It's so hard to slow down, breathe, take 24 hours and then speak about your concerns

There's a relatively large new section in the new terms about lender behaviour, harassment and misconduct.

With CrowdProperty lenders suffering a lot of bad debts at present, it's super important that you try to breathe deeply, slow down, take 24 hours to sleep on any aspects that are bothering you, and try and gather yourself.

I know that can be easier said than done when you think or feel a company, or people behind it, have done something very wrong.

Remember, the person answering the phone or email likely wasn't responsible, is probably a nice person and is definitely a human being – even if you no longer like the company.

Even if you get through to someone who you think is actually directly responsible, they're also still human in the end.

Staying calm is much more likely to lead to better results for you and being very angry, or worse abusive, is not going to make you feel better. It might lead to consequences for you though, so please try.

On that note, all the best to you all!

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