Lendy Sends Shockwaves But No Surprises

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By on 26 October, 2018 | Read more by this author

https://www.4thway.co.uk/?p=14133

From our point of view, it was never a good start for  Lendy, formerly called Saving Stream. Since the beginning, it never passed the basic, simple tests cited in principles one and three of 4thWay's 10 P2P Investing Principles.

Lendy logoIn short, Lendy hasn't provided enough information about its risks and rewards to be properly assessed by our experts or to be listed in the 4thWay comparison tables, and it does not publish enough information for the raw public to make their own assessments based on the same.

So it's been an easy one for most 4thWay users to avoid.

However, a lot of other Lendy lenders might be pretty worried right now if they have not been sensibly spreading their money across lots of different P2P lending sites.

So many troubling loans

In a revealing article, The Financial Times (which did well in finding a source for Lendy's loanbook, which is usually restricted to lenders' personal use only) found that almost two-thirds of borrowers failed to repay their loans on time, with their loans falling at least a day late.

The Financial Times' interpretation of the data is not correct. The actual proportion of loans that fall late is lower than that. But it is obvious that there are far too many loans that are worryingly late or in trouble.

Lendy's own public statistics are very limited, but they still show that around a quarter of its outstanding loans are at least 180 days late. That's half a year. Which means there must be many tens of millions of pounds-worth of loans that are extremely late.

It is quite common for the types of loans offered by Lendy – short-term property (bridging) loans and development loans – to fall late. But this is a large amount of very late loans compared to the similar competitors that provide 4thWay with detailed loanbook data.

Why doesn't Lendy talk about bad debts?

It is highly suspicious that, after all these years, and all these late loans, Lendy does not class any loan in its public website statistics as worse than merely “non-performing”. It doesn't go so far as to call any of them bad debts or any similarly stronger expression.

And it hasn't publicly acknowledged any write-offs in its website statistics, or at least explained why it hasn't had to bite the bullet on any of its very late loans yet.

The Financial Times article states that an £8 million loan for a Marylebone development was not even considered “non-performing” last week, even though Lendy issued a formal demand for repayment of the late loan over a year ago.

And an £11 million development loan is only now going to be classed as non-performing, even though the borrower went bust in June.

Particularly with this kind of lending, what lenders need to see is rapid action against late and bad debts. That is one of the key indicators of how well a peer-to-peer lending site will recover bad debts. From the limited information we can see publicly, it looks like Lendy is neither quick to take serious action nor quick to reveal the extent of problems that loans are suffering.

It's not the regulator's job to fix Lendy's problems

The Financial Times article goes on to state that Lendy has asked the Financial Conduct Authority for help with a “vexatious” £10 million claim that the Marylebone borrower is bringing against Lendy and the lenders who lent to it through Lendy.

It could well be that the claim is vexatious. But it seems absurd that Lendy is asking the regulator for support and  smacks of desperation. It is up to Lendy to manage the risks – which is the whole point of money lending – and that includes taking on borrowers and loans where it can comfortably handle the risks if the loan goes wrong.

If it had been more open with lenders and analysts, and quicker to publicly acknowledge bad debts, perhaps I could have granted it a bit of goodwill and sympathy. It has not earned it.

The opinions expressed are those of the author and not held by 4thWay. 4thWay is not regulated by the ESMA or the FCA, 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.

2 responses to “Lendy Sends Shockwaves But No Surprises”

  1. Johncole0452@gmail.com says:

    I too agree with the statement you published. I provided to write off my remaining investments a year ago but in that year not one has been recovered. At best the platform is very poorly managed. Investors need to be compensation for not taking g action to close them down.

  2. Neil Faulkner says:

    A reader emailed us with a little more information along with an interesting (if very negative) opinion about the impact of this affair on the P2P lending industry. He wrote:

    “This litigation, should it go ahead as the borrower wishes, will, if it does not kill off completely, change forever the P2P market. I suspect it is this potentiality that has prompted Lendy to involve the FCA rather than an abdication of risk management responsibility as you suggest. A court has already decided that the litigant should be granted access to the names of all individual Lendy investors in this loan, and seeks judgement on the claim that they along with Lendy are responsible for the overall grievance.

    “Should this litigant convince a court that they have the right to bypass Lendy, the P2P vehicle, and hold accountable the individual contributors to the Lendy approved loan, for the claimed losses, which are way in excess of the original loan value, I suspect you’ll be printing your last copy within a year.

    “I have yet to find a P2P lending site which does not warn potential investors that they may lose money, that past performance is no guarantee, but I’ve yet to find one warning that you may be at risk of law suits, law suits for claims many times in excess of the loan contribution you made…that is the real story, the story you should have addressed.

    “Your piece creates a fictitious and misleading picture of Lendy as something separate, something remote to your wise readers, it is not, the claims currently made against Lendy could have been made against any P2P lender, this is an industry battle not a Lendy one.”

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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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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.

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