Kuflink Update On Selling Loans And Its Name Change

Two small changes to write about today.

About selling your auto-lend holdings

For quite some time, Kuflink lenders have been allowed to attempt to sell individual loans they chose for themselves. This is when they used Kuflink's manual lending account, called “Select-Invest”.

Now, as of the end of May, some lenders can also sell their auto-lend holdings in Kuflink's “Auto-Invest” accounts.

I don't know why Kuflink has taken the trouble to launch this new feature for its auto-lend accounts, because it is winding these accounts down. There will be no new loans and no new lenders.

But now at least you have the choice of attempting to sell your loan parts early, rather than waiting for repayments from borrowers.

Auto-lend lenders were informed about how its new secondary market works in a 43-sentence email from Kuflink in early June, so I'll just give you a five-sentence summary of the key bits:

How selling auto-lend holdings on the secondary market works

• You're not charged any fees for buying and selling auto-lend holdings (and I haven't found any hidden costs).
• Ordinary investors (often called “restricted retail”) can't currently buy or sell, meaning the secondary market is limited to special categories as defined by the regulator, namely high-net worth, self-certified sophisticated investors and sophisticated investors.
• Kuflink makes the point that its “related parties”, e.g. directors and shareholders in Kuflink, are not allowed to buy or sell on the secondary market.
• You have to sell the full amount you bought at any one time, although if you've made multiple investments in an auto-lend account over time, you can choose to sell each investment separately.
• Sellers can set the resale price up to 120% of face value or as low as 60% of face value, e.g. you could attempt to sell a £1,000 holding for as much as £1,200 or as little as £600.

What this means

This new feature means you can potentially leave earlier if you want to use your money for something else. But that can be a double-edged sword, as, for example, it can mean you can now sell at a massive discount if you become irrational and panic.

When you sell, you sell everything. That means bad debts – defaulted loans – can be sold. A couple of other platforms also allow you to sell bad debts, such as HNW Lending and CapitalStackers. That is truly for skilled, experienced and, above all, levelheaded lenders only.

But here it's even more noteworthy, because large amounts of the pools of loans that are within the diversified auto-lend accounts are bad debts at any one time.

Plus, the proportion in default is very likely to keep growing now that Kuflink is winding down the accounts.

That's because more and more good loans within the accounts will be repaid in the coming months, and that will leave just bad debts that are going through recovery steps. Those recoveries could take years and they are never guaranteed.

Even now, it looks like around two-thirds of the loans in the holdings listed for sale are defaulted loans.

After a flurry of initial, wild trading activity in the days after launch, I think most listings are now priced at or around par and they don't appear to sell easily.

It's presumably difficult to sell loans for their initial value when prospective buyers of your loan parts have information that was not known to you when you started lending: both the scale of bad debts in the pool and the fact that new good loans will no longer enter the pool to dilute any remaining bad ones.

On a separate note, with Kuflink taking the step of informing you that parties connected with it are not allowed to use the secondary market, that particular statement has extra meaning in light of Kuflink's recent problems. (See the links in the Further Reading section lower down.)

Something to note when attempting to use this secondary market

One lender has reported some teething troubles to us that could do with fixing.

As borrowers make repayments to your loans, the discount and premium figures for holdings listed on the secondary market get a little messed up. In extreme cases, this leads to Kuflink automatically delisting parts that are put up for sale when the premium is bumped over the 120% maximum.

To fix that, Kuflink probably needs to make automatic adjustments to listing prices to reflect any loan repayments that come in.

The Something More Group Ltd

Getting to the other very small piece of Kuflink news – a name change.

Kuflink is made up of several businesses. The overall group business was called “Kufink Group Limited”. Now, it's been renamed “The Something More Group Ltd”.

I don't know the reason for the name change. Kuflink promoted a new CEO last year, and so he and his management team might be shaking things up due to a new strategy.

Or they might be trying to distance themselves from a brand that has become severely tarnished.

At the time of publishing this piece, Kuflink is yet to update its peer-to-peer lending website with this change of name, e.g. in its privacy policy or in the legal text in the footer of every page.

Further reading

Kuflink In Trouble With The Financial Conduct Authority.

Brief Kuflink Update.