Missing Capital (from full repayments) Options

[proon]

I sent a similar mail to this to Zopa in mid June, and this message is a repeat... (updated with the June statement information). I've had no reply as yet, so I'm hoping that Zopa will respond. I will report my own post to get attention.

I have been a lender at Zopa since 25 July 2006, and currently I have 175 outstanding loans - with 10 borrowers having repaid in full.

The borrowers who have repaid in full are shown below;

CODE

Loan Date Borrower Repay Date Loan Capital Interest Total %capital
4-Oct-06 joXXXXXXXn 12-Jun-07 £10.00 £10.009032 £0.720968 £10.73 100.0903%
9-Oct-06 hoXXXXXs 2-May-07 £10.00 £10.000705 £0.589295 £10.59 100.0070%
4-Oct-06 mcXXXXX1 27-Mar-07 £10.00 £10.000240 £0.509760 £10.51 100.0024%
20-Feb-07 jaXXXXXXXe 21-Mar-07 £20.00 £20.000034 £0.129966 £20.13 100.0002%
11-Feb-07 doXXXXXe 21-Jun-07 £20.00 £19.999810 £0.400190 £20.40 99.9991%
25-Feb-07 drXXXXXa 21-Jun-07 £10.00 £ 9.999398 £0.200602 £10.20 99.9940%
21-Sep-06 daXXXb 17-Feb-07 £50.00 £49.994290 £1.245710 £51.24 99.9886%
26-Dec-06 miXXXXX0 18-Jun-07 £10.00 £ 9.998612 £0.281388 £10.28 99.9861%
24-Aug-06 JiXXXXXC 5-Apr-07 £30.00 £29.992454 £1.237546 £31.23 99.9748%
21-Oct-06 paXXXXXXXXl 17-May-07 £10.00 £ 9.963960 £0.296040 £10.26 99.6396%

The repayments by doXXXXXe, drXXXXXa, daXXXb, miXXXXX0 and JiXXXXXC are less than the capital, but by less than a penny - although given that daXXXb and JiXXXXXC round down to £49.99 and £29.99 I would have expected them to round
up to £50 and £30 - which would eventually cancel out with joXXXXXXXn, hoXXXXXs, jaXXXXXXXe and mcXXXXX1 who are slightly above the amount loaned, so these are less of a concern.

The one that concerns me more however, is paXXXXXXXl, as the capital repayment is a full 3.6p short of the amount loaned, whilst it is "only" 3.6p, this will soon add up to bigger numbers - and perhaps more concerning is the fact that I will end up paying tax on more than I should.

Please can you confirm for me that the repaid capital should match the amount loaned (rounded up or down as appropriate), and can you please confirm what has happened with paXXXXXXXl, daXXXb and JiXXXXXC as the repayments don't match the amount loaned.

Thanks, Malcolm (zopa username = proon)

[kirklean]

In his defence, Perterkins has already acknowledged that one:-
However, am I the only one here dying learn why he doesn't pay tax? NO tax at all, Peterkins?

Could it not be that they are below their personal threashold (around 5k)? I can see this perhaps being the case with people that stay at home to look after kids for example or if they are a student who is quiet prudent about how they look after money.

[cashsolution]

Could it not be that they are below their personal threashold (around 5k)? I can see this perhaps being the case with people that stay at home to look after kids for example or if they are a student who is quiet prudent about how they look after money.

ask warren buffet

[Peterkins]

Could it not be that they are below their personal threashold (around 5k)?

That's right.

Liz

[CoogarUK]

That's right.

Liz

So you live on less than £5.3k annually?

Sorry, I'm being too nosey now.

[Peterkins]

My "Significant Other" keeps me in the manner to which I've become accustomed!

[kirklean]

My "Significant Other" keeps me in the manner to which I've become accustomed!

Remember when that fat ex chancellor done away with married tax code allowance because he could fleece more tax out of individuals. Poeple have to have seperate tax allowances and this is what made all this sort of thing possible. Take full advantage of it. By the way, Mr G Brown is my local MP and not a particularly good one at that.

[Peterkins]

So I say again, until someone has a complete set of payments from "MY STATEMENT" for a fully paid loan, and can then show total capital repayments don't equal amount of loan, should we be worried.

One of my borrowers has fully repaid their loan (20 months early) and I have a complete set of payment figures from "My statement". I.e. the amounts that end up in my holding account. The loan was for £20 and the sum of the capital payments equals £20. Exactly.

As others have reported, the figures taken from the downloadable statement don't balance exactly.

The following shows payment date, payment, capital and interest from "My statement" and capital and interest from the downloadable statement:

30.4.07 £0.90, 0.78 + 0.12, 0.77910162 + 0.12089838
31.5.07 £0.89, 0.77 + 0.12, 0.77381123 + 0.11618877
28.6.07 £0.90, 0.79 + 0.11, 0.78848885 + 0.11151115
31.7.07 £17.78, 17.66 + 0.12, 17.66423908+ 0.11576092

Totals £24.47, 20.00 + 0.47, 20.00564078 + 0.46435922

So I consider everything OK for this loan. "My statement" shows I have received £20 capital repayment into my holding account plus 47p interest.

And if Chancer is correct in saying that the interest figure from the downloadable statement is the one used when calculating yearly interest for the IR, I shan't complain about it being too low by half-a-penny.
Perhaps the next case for me will be the other way round.

Watch this space.

[giles]

Afternoon all

I will try to answer your question, please bear with me....

When early repayment of a loan is requested, Zopa calculates the interest outstanding as at that date. If the borrower repays via his debit card on that day all the interest and capital due is repaid. If the borrower wishes to repay on a different date in the future then the calculation is done based on that date. Should the borrower choose to repay by Direct Debit the borrower isn't penalised with additional interest for the payment processing days - 3 working days. This was a business decision made by us but I understand it favours borrowers over lenders and perhaps we should review it - would welcome your thoughts. Please bear in mind this only applies to early repayments and not regular monthly payments.

When we do receive the payment we credit any interest due first and unhelpfully, instead of using the interest as calculated above, the system calculates the actual due even if there has been a delay caused by a BACS payment (typically 3 days but longer if over a weekend), and we credit the remainder as capital. This gives rise to the capital shortfalls many of you have seen and really reflects the fact that you haven't had as much interest as perhaps you would argue you should have done, had we not favoured borrowers.

We are fixing this and are choosing to recompense the "capital" shortfalls lenders have seen over the next few weeks, notwithstanding the explanation above.

I hope that's helpful, I'm sure you will let me know if not!

Giles

[roger_at_zopa]

Afternoon all

"This was a business decision made by us but I understand it favours borrowers over lenders and perhaps we should review it - would welcome your thoughts."

Giles

I think I can say that lender's were under the impression that they can expect the rate of return they have been quoted for all lending including early repayments, not just lending that goes full term.

I can only see 3 options for Zopa

1) Disadvantage the lenders by under paying them as is currently happening.
2) Disadvantage the borrowers by charging them extra so that the payment to the lender is correct.
3) Cover the costs from the fees that Zopa already takes.

Out of these 1 and 2 are going to invalidate the quoted APR and AER so you are only left with option 3. Also stating that the delay is 3 working days is only part of the issue, when you consider that rates of return are calculated using calender days not working days. It is quite possible for there to be a 7-8 calender day delay if the payment process happens over Easter or Christmas.

Roger

This post has been edited by roger: Aug 2 2007, 04:06 PM

[CoogarUK]

I think I can say that lender's were under the impression that they can expect the rate of return they have been quoted for all lending including early repayments, not just lending that goes full term.

I accept that borrowers are entitled to repay early without penalty. It's a consumer's rights issue and although not overjoyed I have no problem with it.

However, as a lender I do expect to receive my quoted return on money I lend out for the duration that it remains lent out - and as far as I am concerned that's from the moment it leaves my holding account until the moment it is returned.

[Deddington]

Thanks for the response Giles.
I agree with CoogarUK .I don't think it unfair to have the time taken for money to move through the system in the Lenders favour. It is hardly breaking the "No penalty on early closure" commitment to borrowers.

[adilowes]

Thanks for the response Giles.
I agree with CoogarUK .I don't think it unfair to have the time taken for money to move through the system in the Lenders favour. It is hardly breaking the "No penalty on early closure" commitment to borrowers.

I agree if I go overdrawn at my bank by £50 and go and pay cash in to bring it back into the black the following day I would expect to pay 1 days interest (plus penalty fee( which is to cover admin (right))) but if I transfered funds in from another bank that would not appear in my account for 3 days then I would expect to get charged 4 days interest.
Surely this is the same. If they pay via instant debit card it won't cost them as much but via bank transfer, Direct debit or the like it will cost a little more.
I mentioned in another thread if it easier for zopa to keep it as it is then maybe if we at least got interest as though the money was in our holding account from the day the borrower stops paying interest.

[CoogarUK]

I agree if I go overdrawn at my bank by £50 and go and pay cash in to bring it back into the black the following day I would expect to pay 1 days interest (plus penalty fee( which is to cover admin (right))) but if I transfered funds in from another bank that would not appear in my account for 3 days then I would expect to get charged 4 days interest.

Agreed. If I fund my current account with cash then it is credited same day. However, if I fund it from an external acount then it is not normally credited until two working days (third working day) after leaving the other account.

Like I just mentioned on another thread... roll on same-day BACS transactions!

[Peterkins]

The appropriate FAQ states that, when a borrower has requested a full repayment and has been given the total amount due, they then have 10 days in which to make repayment. Obviously with a potential 10-day interest free period to a detriment to us lenders.

If this is still true (and from some full repayments coming 7 days after regular payment with no additional interest I think it is), then I suggest the interest element of the repayment be calculated to 10 days later when the borrower makes the request.

[OpsDirector]

Hi All

When a borrower requests a repayment figure, he's given the figure it will be in 10 days time with a note that should he pay back earlier than 10 days the amount will be reduced accordingly.

If he then pays by Debit Card the full amount of interest is paid. The perceived underpayment comes from the BACS processing time after date he's agreed to repay.

Regards

Linda

[kirklean]

Hi All

When a borrower requests a repayment figure, he's given the figure it will be in 10 days time with a note that should he pay back earlier than 10 days the amount will be reduced accordingly.

If he then pays by Debit Card the full amount of interest is paid. The perceived underpayment comes from the BACS processing time after date he's agreed to repay.

Regards

Linda

Thanks for the explanation, and please don't see this as a huge dig, mearly an observation.
Obviously there has to be some method to sort this out and flag when this happens to Zopa staff so that it can be sorted out. It does, as I am sure you will appreciate, represent poor value for money when you lend someone £10 and only get £9.76 or whatever back. This means you interest is actually being used to fund the capital which is bad and it is wrong.

[roger_at_zopa]

If he then pays by Debit Card the full amount of interest is paid. The perceived underpayment comes from the BACS processing time after date he's agreed to repay.

Sorry but I have to take issue with this statement. Its not a perceived underpayment its a real underpayment as the funds in questions are not receiving interest from the borrower or from being in the holding account which invalidates the rate of return quoted to the lender. As someone else has already pointed out it maybe the case that the funds are still incurring the .5% management fee charged by Zopa.

Roger

[adilowes]

Sorry but I have to take issue with this statement. Its not a perceived underpayment its a real underpayment as the funds in questions are not receiving interest from the borrower or from being in the holding account which invalidates the rate of return quoted to the lender. As someone else has already pointed out it maybe the case that the funds are still incurring the .5% management fee charged by Zopa.

Roger

I have just increased my rates slightly (by 0.4%) to take into account this loss of interest. Can I suggest others do the same. If enough do it then none of us will loose out and the headline rates will go up however the actual amount paid by borrowers won't.

[chancer]

there would not be a 'perceived' underpayment is zopa told lenders their rate of return rather than assuming that a lender recieves the same rate that a borrower pays.

every lender return ever mentioned by zopa is overstated and it wouldnt take a genius to fix that.

[CoogarUK]

Sorry but I have to take issue with this statement. Its not a perceived underpayment its a real underpayment as the funds in questions are not receiving interest from the borrower or from being in the holding account which invalidates the rate of return quoted to the lender. As someone else has already pointed out it maybe the case that the funds are still incurring the .5% management fee charged by Zopa.

Roger

That's a very good spot that I hadn't picked up on.

So the 'BACS delay' - whilst already serving to reduce a lender's return - could also result in the lender being overcharged on Zopa fees, in which case I feel that the onus is on Zopa to subsidise the 'BACS delay' anomaly from the lender fees, as I think has already been suggested elsewhere.