Ratesetter Proposed Changes to Fees
Last edited 26/09/2018 - 11:01 by 1 other user
Page 11: Section 2.2 of the Explanatory Memo - Changes to interest margin fee
Anyone with Ratesetter have thoughts on the fee changes? Feels like a bad deal for members as it gives RS the ability to take a larger cut without needing to do any more work
My thoughts from Whirlpool thread:
If I'm understanding correctly, under the new proposal they're separating the way Ratesetter's fee is collected. At the moment Ratesetter takes 10% of the interest you earn as their fee. Using their example of a 6% interest rate for borrowers, members would currently receive 5.4% and Ratesetter would receive 0.6% as their fee. Under the New Interest Margin Fee, 6% borrower interest rate could be split as 5% going to members and 1% going to Ratesetter. In essence, members would receive less under the New Interest Margin Fee.
While they've stated that during implementation, they won't affect the status quo (ie: same return as current Interest Margin Fee), it does allow Ratesetter in future to move the interest split significantly to take a larger cut of the return – up to 3%. At this extreme, using 6% interest rate for borrowers, 3% would go to members and 3% as Ratesetter's fees. As lenders we lend at 3% interest, while borrowers would see 6% interest rate on their loan.
…It's the longer term that I'm concerned about – under the New Margin Interest Fee we could be getting 'relatively' less.
As interest rates go up and banks lift their rates, RS will naturally increase their borrower rates. If a borrower is willing to pay 12% interest, would you still be happy receiving 9% (and RS taking 3%) when you could be receiving 10.8% (and RS taking 1.2%)? I would feel like I've missed out on 1.8%!
IMO RS are looking to futureproof a way to increase their profits at the expense of members.
Edit: added my thoughts for context