Funding Circle Buries Its Data: Should Lenders Be Worried?

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By on 15 June, 2018 | Read more by this author

From now on, just Funding Circle itself and the partner it has commissioned, AltFi, will be able to access and assess the details of all the loans Funding Circle has ever made.

Funding Circle has removed access to this powerful and important data for the public, and independent analysts such as 4thWay's risk specialists, credit experts and investment journalists.

The loan book, which used to be easily accessible to download with few steps, contained every historical loan Funding Circle ever made. Up until spring 2018, Funding Circle had updated it on a daily basis with a record of new loans made and whether existing loans had been repaid, fallen late or gone into default, as well as showing recoveries made, the borrower grade and the type of loan.

It is this data that allows 4thWay's experts to conduct international banking standard tests to see how a P2P lending site's loans might perform in a severe recession. Without a commitment to regularly updated data, Funding Circle has lost its 4thWay PLUS Ratings and 4thWay Risk Scores.

Funding Circle goes into reverse

Funding Circle's about-turn on access to its detailed data happens at a time when the number of platforms that have started providing full data access either publicly or to independent analysts has been rising quickly.

Just a few weeks ago, 4thWay had contacted all platforms that did not provide details of every loan to let them know that we expect that information to be available to the public and/or to independent researchers.

4thWay has been requiring a greater level of regular information and data from platforms in order for them to be continually assessed for a rating. Based on experience, 4thWay's experts have been trending towards even greater emphasis on platforms that are very transparent.

Why is Funding Circle doing this?

Now that Funding Circle is looking to be listed on the stock market, perhaps its pride has risen further. It is also possible that its backers believe that it should not publish information any more, although I'm finding it tricky to think of a lot of specific reasons why they would do so.

After Funding Circle restricted access to its preferred partner only last week, we contacted Funding Circle for a comment. A Funding Circle spokesperson said of the new restrictions: “We have to limit the potential avenues for public access” and “We won’t be able to provide third-party analysts with ongoing access to loanbook-level data”.

Funding Circle had previously queried why 4thWay did not give its lending accounts the very top 4thWay PLUS Rating.

What should we make of this big step backwards

My view is that this is nothing less than extraordinary. It is an extremely bizarre move to go so rapidly backwards on transparency.

One of several advantages of peer-to-peer lending over bond investing has been the level of detail available to investors and analysts. Even lenders who don't use the detailed data for themselves can get reassurance from the fact that others will be doing so.

Maintaining complete openness on every loan shows that things are continuing to go well, which is why the rest of the industry is opening up as well.

Should you be worried?

I think the majority of existing lenders with existing loans probably don't have much to worry about. Up until this point, Funding Circle's overall performance has been excellent provided you spread your money across hundreds of loans and re-lent regularly.

4thWay has been receiving calls and emails from an increasing number of dissatisfied Funding Circle lenders, who say that too many debts are going bad. As far as 4thWay's experts could see from the last data Funding Circle provided – before it withdrew it – there were no signs that the complaints were justified. The vast majority of lenders who spread their money across hundreds of loans and have held on till they earned enough interest, and until recoveries of any bad debt had progressed, should end up being satisfied with their results.

Should you keep lending through Funding Circle?

Regarding lending in new loans in the future, lenders should always adjust their views of a P2P lending site based on the level of transparency, potentially reducing or closing their holdings where there is less openness.

Transparency is such an important thing for investors to assess risks, whether they invest in the stock market, IFISAs or anything else. That is why it is one of the 10 P2P Investing Principles that we brought to you in 2014.

Taking away access to data from investors and independent analysts, and restricting it to just one favoured provider, doesn't fit that bill:

Principle Three of the 10 P2P Investing Principles: Treat buried information as if there's a reason, missing or ambiguous information as if it contains bad news, and decreased information as if it contains worse news. Demand more verifiable information the less that is provided freely.

Prior to this announcement, I was very optimistic for Funding Circle lenders. Now, with future loans, based on our standard approach to transparency, I feel like it's a little bit more of a wait-and-see what happens.

If it appears from the summary statistics on its website, and from any other ways we can corroborate (sadly no longer the loan book) that it has continued to have a good record on new loans over the coming years relative to similar peer-to-peer lending sites and similar bank lending portfolios, especially through and after its listing on the stock market, it could become one of the few unrated P2P lending sites that one or more of my colleagues and I might still be interested in.

Visit Funding Circle.

How New Ratings Have Shaken Up The P2P Lending Comparison Tables.

Other web pages linked to above:

4thWay's 10 P2P Investing Principles.

Peer-to-Peer Lending vs Bonds.

The opinions expressed are those of the author and not held by 4thWay. 4thWay is not regulated by the FSMA and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.

Experts, journalists and bloggers who conduct research and write articles for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.

The 4thWay® PLUS Ratings are calculations that were developed by professional risk modellers (someone who models risks for the banks), experienced investors and a debt specialist from one of the major consultancy firms. They measure the risks and rewards of losing money in scenarios up to a serious recession and a major property crash, and they assume you spread your money across lots of loans and rated P2P lending accounts or IFISAs. The rating is calculated using objective criteria that can be measured and improved on over time, although no rating system is perfect. Read more about the 4thWay® PLUS Ratings.

Our service is free to you. We don't receive commission from the above-mentioned companies. We receive commission from some other P2P lending companies when you click through from our website and open accounts with them. This doesn't affect our editorial independence. Read How we earn money fairly with your help.

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This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

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Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

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Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

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