May 7, 2019

Funding Circle Shutdown

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The last few years I have written annually about the performance of my Funding Circle P2P investment. Last year, despite good returns, I mentioned that I has begun to significantly reduce that investment. Soon after I stopped reinvesting in any new loans and starting moves to have my capital and profit withdrawn. Thus there is little point in giving details on the returns.

Most of my money was returned reasonably quickly (over a couple of weeks). Although, at this moment nearly a year since starting the draw-down process, some 5% of my original investment is still in the FC account. I expect another 2% will be returned soon, but have no idea when the last 3% will get back to me. This delay is something FC investors should consider.

In the current FC system there are two ways to get your money out of loans. Firstly, you can wait for the loans to be completely paid back. As some loans can be for 60 months, this will take a while. Secondly, you can request that FC sell your loans to other investors. Previously this sale could be performed on a loan-by-loan basis with seller determined discounts or premiums to the loans NPV. However, under FC’s newish aggregate loan system, you can only specify the monetary amount you wish to sell, and FC does the rest. This process takes a few weeks (the shortest for me was a week, the longest 5 weeks).

The problem occurs because FC refuses to sell any loan that is delinquent in its repayments. That seems fair. With the new aggregate loan system the purchaser of the loan is not choosing the loan, so receiving one in arrears is not a good deal. I would expect most late loans would either get back on schedule reasonably quickly (and can thus be sold) or become bad debt (which is essentially a loss). So I was surprised to discover that 3% of my portfolio is in loans that are incredibly late. One of them is over 500 days late! Another 3 are over a year late! I would have thought a loan that hasn’t made a repayment in more than 12 months is actually in default, but FC obviously disagree.

So remember, even after you want to stop, a little bit of your money will be stuck in FC for a long time. That should be counted against any potential profit. In my experience, the returns have still been much better than a bank, so I don’t regret it, I’m just a little annoyed that I am unable to close the account properly.


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