Hi all, heard about the site ratesetter.com.au a few months ago. I know they've had success in the UK but has anyone tried it in Australia? I've tried looking for reviews etc. and there really isn't much at all written about it.
I went to sign up and they asked for a fair bit of personal info. Which is probably warranted but thought I'd ask for personal experiences first.
Good points to consider thanks.
So when someone defaults with a bank, they get companies to chase them for the debt. With this, nothing really happens besides a mark on their credit history?
With this, nothing really happens besides a mark on their credit history?
It's unclear. It appears as if the risk remains on you as an individual. So you probably have legal avenue to try to recover the debt…at your own cost. Banks sell of their bad debts to collectors, but they do so in bulk - as an individual you won't have that option.
Reading more into RateSetters provisional fund makes it seem even less like it'll ever be paid out unless it was something major that risked serious public damage to the company. In fact they call this out:
In the event of financial loss incurred by the lender, the lender may not be fully or partially compensated for a number of reasons including:
•RateSetter may elect to not make a claim to the Provision Fund
•RateSetter may elect to make only a partial claim to the Provision Fund
•The Provision Fund may not have sufficient funds in it to provide a lender with any compensation
So they can just choose not to give you any money. Pretty sure that's the choice they'd make if you're a small lender.
Too much risk and not enough control for a small time lender in my mind.
Maybe you and others might want to look at this article
http://mozo.com.au/personal-loans/guides/peer-to-peer-lendin…
Thanks for the link! Looks like it is indeed risky and unregulated.
Anyone know what interest they offer for you to lend? I know it's somewhere between 4.5% to 8% but how do they work out what pays more or less etc?
Hey, in the article, I see more than 1 P2P operator:
"Who are the Australian P2P players?
SocietyOne (Westpac has an equity stake in the platform),
DirectMoney and
RateSetter are currently the only major players in the P2P Australian game
but more are expected to come.
All three platforms have a business model based on
attracting creditworthy customers
who are looking for more competitive loan rates
than what traditional providers can generally offer. "
Hi everyone,
I'm Glenn, the Head of Operations at RateSetter Australia. We're very excited to see the increased profile of peer-to-peer lending, and I'm happy to answer any questions you may have. To get started though I just wanted to correct a couple of the comments so far.
1) RateSetter Australia is regulated by ASIC, and holds an AFSL and ACL. The RateSetter Lending Platform is a registered Managed Investment Scheme regulated by ASIC. We spent around two years working with ASIC to achieve regulation, and are very proud to be the first and only peer-to-peer lender in Australia licensed to accept funds from retail investors.
2) A decision to submit a compensation claim to the Provision Fund will have no impact on the profits of RateSetter. The Provision Fund is a trust established for the benefit of lenders, and the assets of the Provision Fund do not form part of the property of RateSetter. RateSetter has no claim on the capital which is in the Provision Fund and it cannot use Provision Fund monies for its own purposes.
3) The RateSetter group globally is extremely proud that thanks to the Provision Fund concept none of our lenders - big or small - have missed a cent of capital or interest due. However, we're very careful to remind our lenders that the Provision Fund is not a guarantee or an insurance product, and in the event a compensation claim is not made following a borrower late payment or default a lender may suffer financial loss.
4) We have a comprehensive process for recovering borrower late payments and defaults - this responsibility doesn't fall on the lender! In the event we were to enter insolvency we have a plan in place to administer borrower payments and
manage the wind-down of loan book.
If you're thinking about investing with RateSetter you should have a read of our Product Disclosure Statement. It's comprehensive yet readable, and is available at https://www.ratesetter.com.au/documents/document/pds
As I say, please let me know if you have any further questions about peer-to-peer lending or RateSetter - we're happy to help. Or if you'd prefer, feel free to send me a private message.
Hi Glenn,
Skimming through the FAQs this phrase has caught my eye:
"All lenders are responsible for paying any relevant taxes on lending through RateSetter."
Is there something else apart of declaring the interest income and do you provide an interest statement at the end of financial year?
Hi there,
Unfortunately I can't provide guidance on your specific circumstances, however pages 43 and 44 of our Product Disclosure Statement (https://www.ratesetter.com.au/documents/document/pds) provide a general overview of the income tax implications for Australian investors. You should of course seek advice from a suitably qualified tax advisor before investing.
We will provide all lenders with a statement at the end of the financial year detailing their interest earnings and fees paid.
Cheers,
Glenn
Hi Glenn,
Thanks for clearing some things up!
We have a comprehensive process for recovering borrower late payments and defaults
Is this detailed anywhere? In the PDS it says:
What happens if a borrower misses a payment?
An unfortunate feature of lending money is that occasionally people are late with their payments or default on their loan. When this happens RateSetter Australia may make a claim to the Provision Fund to reimburse you.
It's difficult to assess the risk as a lender if you don't know the vigour of the recovery process. What's your driver for putting time and money into recovering loans aside from reputational damage?
Hi again,
Assuming a claim is made on the Provision Fund, any funds recovered from the borrower thereafter are contributed back to the Provision Fund. In that sense your level of compensation following borrower late payment or default depends on a claim being made to the Provision Fund (and the sufficiency of assets in the Provision Fund) rather than our recovery processes.
If a lender is not compensated by the Provision Fund their return becomes more dependent on our recovery processes. From a risk perspective it would be imprudent to disclose too much detail about these, but broadly they follow any other financial services provider, with in house recovery efforts as a first step, and external debt collection and even legal/court action if later required.
As with RateSetter in the United Kingdom we hope to establish ourselves as a trusted retail financial services provider, using technology to replace traditional middlemen and deliver both borrowers and lenders a better deal. The Provision Fund failing to help protect lenders from financial loss would be a substantial impediment to achieving that.
Finally, we pride ourselves on our transparency, and believe it to be integral to peer-to-peer lending. We therefore publish a range of statistics about (among other things) the Provision Fund, estimated defaults, past credit performance, and past borrower characteristics. For unregistered users, the following links contain a summary:
https://www.ratesetter.com.au/lending/statistics.aspx
https://www.ratesetter.com.au/lending/provision_fund.aspx
If you register (free, takes a few minutes and carries no obligation to lend) you can view further details by logging in and clicking the "RateSetter Data" tab.
Cheers,
Glenn
Hi Glenn
What determines the current lending rate? Noticed you had a rates history page:
https://www.ratesetter.com.au/lending/market_trend.aspx
Current rate of 4.2% for one month is pretty much the lowest it's been since you launched. Would probably give it a "punt" at 6% but am wondering how the rates change?
Also, are you looking at adding more lending markets between one month and one year?
Hi Tex,
Thanks for your questions.
Interest rates are set by lenders and borrowers according to the supply and demand for funds at different interest rates.
In each lending market, lenders submit lending 'orders' specifying an amount and an interest rate. These orders are 'on market' and are available to be matched with borrower loan requests.
Approved borrower loan requests are matched with lending orders starting at the lowest rate and moving up until the entire value of the loan request has been matched - not too dissimilar to the operation of financial markets. The rate on the borrower's loan will be a weighted average of the rates at which their loan was funded.
You're free to specify a rate higher than the prevailing lowest rate in each market, however in general the lower the rate you specify the quicker your funds are likely to be matched with borrowers.
Finally, at present we have no plans to add additional lending markets.
Hope that helps.
Cheers,
Glenn
Hello Glenn
Glad to read of UK RateSetters' success.
Still, AU sometimes sometimes strikes me as a land with more "cowboys" in business.
Do you publish info about your AU-founders + board members business histories?
Also, why is it so unclear as to if / when a claim is made to the protective fund?
I would expect that all the technology in RateSetters would enable it to make claims whenever a Lender is at risk of (or has had) a loss by default or late payment.
As I read the info copied into this Forum, your document allows, eg, Lenders from ONE state would always have their losses covered, but Lenders of another might not.
What am I missing here?
PS Does the UK RateSetters document have the same uncertainty about if / when such claims may (or may not) be made to their fund?
@IVI:
Hi IVI,
We're the only Australian peer-to-peer lender to hold an Australian Financial Services Licence (AFSL), a requirement of which is to prove organisational competence, principally through the retention of qualified responsible managers. Both the website (https://www.ratesetter.com.au/help/about_us.aspx) and the Product Disclosure Statement will tell you all about our local founders and board members; you can also find us on LinkedIn.
Regarding the Provision Fund, we think it's appropriate to be very clear with investors that the Provision Fund is not a guarantee or an insurance product. There are some circumstances - for example, if the Provision Fund was ever low on funds - in which a claim would not be made, and you may suffer loss. You should read the PDS for more details.
We publish real time information on the value of the Provision Fund, current loans outstanding, our expectation of losses, and portfolio-level information about borrowers. Further, if you're a member, you can also view real time arrears performance. We think this transparency is critical to peer-to-peer lending, and we'll be making a very exciting announcement in the next two weeks that will further bolster our status as by far the most transparent peer-to-peer lender in Australia.
In commercial terms the Provision Fund is core to RateSetter's offering of simpler and safer peer-to-peer lending. We make claims to the Provision Fund on behalf of lenders, and as someone below says, RateSetter in both the UK and Australia are very proud that the Provision Fund has always stepped in when required to compensate loss.
Finally, I'm not sure about the question regarding state - could you provide a quote?
Cheers,
Glenn
@glennriddell:
Now that you've done the footwork, some Competitor(s) will be quick to jump in & address lucrative unserved markets, eg, offering 250% Short-Term loans (way below current 300+% pawn shop levels).
Mixing in the Gumtree "trade locally" tradition with peer-to-peer lending, will likely bring "Mobile P2P Lender" out in droves. (Actually, I wouldn't mind seeing the Huge local pawn shops go away.)
As long as future Mobile' folks don't turn nasty, like generations of "Loan Sharks" before them, they might well save current druggies & genuinely poor save a bit on Brick+Sticks pawn shops. (They'd still be keeping folks poor, ie, with 3-digit interest rates, like the one I pulled out of the air, above; so, it's not as good as your currents rates, on the Social Scale, IMO.)
So, is there any upper limit that limits Lenders in your scheme?
@IVI:
Hi again,
We absolutely agree that there should be a robust regulatory framework for peer-to-peer lenders. We've long argued against any dilution of current investor protections.
Regarding investment amounts, the minimum is $10, and there is currently no maximum. There is also no current limit to the number of lenders that may participate.
Regards,
Glenn
@glennriddell:
You seem to have misread me…
I didn't say anyone claimed it DID happen;
I hypothesized that it could, & expect a
reply that convinces me that it won't.
How are Lender funds allocated to loans?
How does one know that the algorithm that
allocates such funds doesn't, eg, give
funds, eg from one group, to better-rated
Borrowers than to another group?
Is the code of your allocation algorithm
Open Source? If not now, when?
You want to be Transparent? I'm here to Help. :-)
What's the point if you can get a similar return on an ETF/managed fund/index fund which annualise to around 7-9% historically?
The UK Parent Ratesetter company boasts on its website that in 5 years of operation not one of its lenders has lost money
a bit of an old thread, but yeah, i've been a lender for quite some time now, and so far so good
Can you describe your income from it? What did you outlay? What's your average %? How often do you get paid?
i'm mostly in 3-year and 5-year lending markets, weighted average rate is currently 8.2 for 3 year loans and 9.6 for 5 year loans. that is the GROSS rate before their 10% cut that they take off every interest payment.
in theory you could get higher rates if you spend some time tracking the rates and NOT leaving it to invest on autopilot but wait for times when demand for loans pushes the rates higher, happens every now and again but hard to predict.
i have several loans in each lending market purely for the purpose of not exposing myself to single lender borrower and get paid pretty much twice weekly and reinvest roughly once a month.
I thought the market rates on their site were NET of fees…?
You say they take 10%…?
@IVI:
Depends where you look I guess but I was speaking specifically about the last matched rates.
Affirmative to the 10%.
Suggest you read the PDS it's an easy read and there's a lot of FAQs answered there
@IVI:
Just to confirm, all lender rates on the site are displayed net of fees. Also, to clarify, our fee is 10% of your gross interest earnings. We think this is very reasonable.
As a simple example to illustrate, if you place a lender order at 8%, the borrower would be charged 8.88%. Our fee is 10% of the gross (fee inclusive) interest earned, or 0.88%, so you would receive 8%.
I do recommend you have a look at the PDS - we went to great lengths to make things as clear and readable as possible.
@glennriddell:
Thanks for clarifying that Glenn.
So just to confirm, after a lending order has been matched if I go into funds on loan section and open up loan properties, the rate listed there is the NETT rate, but the future payments (listed below the summary) are calculated with the gross rate as they include the margin that you charge when borrower make payments?
That's right - if you're looking at a specific loan to which you have been matched the rate displayed is net of fees, but the "interest payable by borrower" column in the "Schedule of Payments" table will show the gross interest payable by the borrower; our fee is levied on this amount.
Regards,
Glenn
@powerhead:
Is it ONLY the 3 & 5 year loans that are UNSECURED?
Or,can any / other loans be UNSEC'd?
@IVI:
any loan can be unsecured
likewise any loan can be secured
i dont really understand your questions tbh, if you want to know whether you could elect to lend only to secured loans - the answer is negative
Anyone who has used this service and has a breakdown on the pros and cons, and the basis of the payments?
here's an example of someone using them:
https://www.reddit.com/r/AusFinance/comments/3l54v3/has_anyo…
I'm interested, but find it a pity you can either invest for one month or one year upwards - and nothing in between.
The rates aren't great for a month (vs risk) but I'm scared off by a one year commitment.
It's easy enough for new players in P2P Lending
to clone RateSetter(s) & compete on fees, eg,
undercut their 10% (from 1 post, above) slice
of Lender's Interest pmt.
Maybe wait a few years & junp in then. :-)
RateSetter may cut their slice size…
RAMS.com.au offers 3.6%, at the moment, ie including bonus interest,
for which, each month you want bonus interest:
Same risk as any other bank account.
RateSetter's 1 month is sitting at 3.5%, with very different risk.
Other bank acc'ts pay 3.5% with bonus; conditions vary.
That's true, 1 month is the only market I haven't touched because of this. The other markets are very competitive and interest is received monthly.
What's frustrating about Rate Setter is that the rate is changing all the time. Put some money on the market at the current rate, wait a few days and nothing happened, log back in and then found the market has move 0.2% lower and there's no way my fund will get a match.
Otherwise the system is pretty neat. Lots of competitors though on the P2P lending market. SocietyOne, Spotcap, MoneyPlace, Marketlend, etc.
that's why it's called market - price depends on supply and demand :)
It usually doesn't take more than a week if you're at the front of the lend queue. A few more are starting up but none seem to have a provision fund so it seems like if a default happens you have the burden rather than the provision fund in Ratesetter's case.
ratesetter is also the only one available to retail investors
A couple are like ThinCats. SocietyOne, MoneyPlace and Harmoney will start early next year. Some are only giving an extra 2-3% interest for a lot more risk though.
thincats is not available to retail investors, wholesale only. RateSetter is the only option for retail investors here.
I would like to post my experience here with RateSetter; for any ozbargainers who are interested.
Summary: I have had a positive experience so far. More details below.
Application Process:
Was easy and straightforward, similar to most online things nowadays. I gave them my drivers licence number and I assume they did an ID check on me, I was ready to lend within 48 hours from memory.
Lending Process:
I lent 500 for one year @ 5.5%. Which was equal to the lowest at market rate at the time. I was matched very quickly, I can't remember exactly how fast but within 24 hours, indicating liquidity in the system. The odd thing with the system is that the rate you set is the actual rate of return; however when you look at the schedule of payments the values are slightly higher as they include RateSetter's cut, not that big of a deal. Also, there is a 3 day delay before you can access the interest. Ie if your interest payments are due on the 10th of each month, they will appear in your holding account on the 13th. You could argue that you only pay this delay once; however it's not really a big deal (for me anyway). It does effect interest calculations if you want to really get anal, this is ozbargain of course.
I did all of this just because I wanted to try it out. 500 bucks is a lot of money, but then again, it's not really… One thing I did not count on was the referral offer they had offered me: 50 bucks for me and a new member if the new member loans 1k (maximum 3 or 5 referrals, can't remember). So we set up an account for my partner and it took an extra day for her to be able to lend, which I would guess as she isn't an Aussie citizen, hasn't lived at XX address for 3 years etc. We had to send a bank statement, whereas my Vic DL previously sufficed. We funded her account with 1k and lent on the 1month market. A couple of weeks later we both received the 50 bonus.
I plan on "investing" 100 bucks a month on the 3 year market to spread my risk to many different borrowers; so far I have done it once, I also reinvested the 50 buck bonus. The good thing about the 3 and 5 year markets is that the repayments are Principal and Interest, which reduces capital risk and helps slightly with liquidity and reinvestment amounts.
Risks:
Of course there are risks. The main one being default, so far there has been 0 defaults apparently. Another one is that this is all paper money, and someone within ratesetter could be siphoning all the funds and sitting on some beach somewhere drinking a never ending stream of pina coladas. This of course is only discovered when investors withdraw large somes of money, then the whole thing crashes. Kinda like what Vlahos did with the betting syndicate. I guess, don't invest unless you trust ratesetter? There is also a long thread on Whirlpool if anyone wants a read.
are any of you guys who are lenders noticing, that borrower payments recently are often getting delayed by up to 1 day? i.e. instead of 3 business days some payments take 4 days to clear back into account. In my opinion 3 days is long as it is, but 4 days is plain annoying.
Hi powerhead,
I'm Ben Milsom, one of the team here at RateSetter. Can you send us an email with the details of the delayed payment so we can look into it further? If you email [email protected] and note that you came from Ozbargain forums, I'll look out for your email.
Cheers
Ben
Sounds kind of risky as a lender, since they're essentially passing on the risk to you. They say that they "protect" lenders by ensuring borrowers have good credit history (banks do that too and plenty of people default bank loans) and they have a Provisional fund which they may choose to give you compensation from, but it sounds very discretionary and since it essentially eats into their profits they're not going to want to do it.
The returns sound amazing, but you have to factor in the risk that for every dollar you lend there's a % chance you'll get defaulted and get 0 back. Hedging that over the possibly 8% returns and it probably comes out somewhere similar to the return rate of a managed fund or a term deposit.
And then there's the possibility of the company going under. Australian banks don't fail, these guys… Who knows?
Looks good, but you have to factor in the risk as there is no guaranteed return.