The administrators BDO who are running Collateral since the court appointed them on 28th April 2018 have updated their frequently asked questions on their website.
This does not make good reading for lenders.
Have borrowers continued to service the loans?
Since the business ceased trading, there have been a limited number of receipts into the Companies’ bank accounts in respect of the outstanding loans. The Joint Administrators have now obtained a significant volume of documentation in respect of the outstanding loans, which will enable them to take steps to recover the loans as they fall due.
This suggests that a number of borrowers have ceased paying Collateral since the administration.
Have the Joint Administrators retained any of the Companies’ staff to assist in the administration?
The Joint Administrators have been advised that the directors made all five members of staff redundant prior to their appointment. Where appropriate, the Joint Administrators are liaising with the directors in relation to the Companies’ affairs.
The Companies’ online platform allowed the investors to choose specific loans to invest into and awarded different interest rates and/or priority for different loans or different tranches of loans. Will I be receiving repayment in respect of each loan/tranche of loan that is being repaid in the same priority?
Whilst the information that has been retrieved by the Joint Administrators to date contains details of the investors and their total loan exposure, it does not provide sufficient detail to extract an analysis of each investor’s investments into specific loans or tranches of loans. The Joint Administrators’ investigations to recover further information are continuing, and we will update investors in due course.
What has happened to the IT platform?
The Joint Administrators’ have been advised that the electronic Collateral platform, and all the data which it hosted (including back-ups of the platform), was held on third party servers which had been decommissioned prior to our appointment, and was therefore not available to the Companies. We have identified the third party server provider, however, and we are currently in correspondence with the provider to determine what action, if any, can be taken to recover the data. A further update will be provided in due course.
It is extreenly concerning to note that it has not been possible to determine what each lender actually owned, and that the IT platform - including backups - has been decommissioned prior to the appointment of BDO.
Will investors be treated as creditors?
From the information currently available, the initial view of the Joint Administrators’ lawyers is that investors will be treated as creditors of the Companies as a consequence of s26 of the Financial Services and Markets Act 2000. A further update will be provide in the Joint Administrators’ proposals to creditors, which are due to be issued on or before 22 June 2018.
Section 26 of the Financial Services and Markets Act 2000 states:
- Agreements made by unauthorised persons.
- An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition is unenforceable against the other party.
- The other party is entitled to recover
- any money or other property paid or transferred by him under the agreement; and
- compensation for any loss sustained by him as a result of having parted with it.
- “Agreement” means an agreement
- made after this section comes into force; and
- the making or performance of which constitutes, or is part of, the regulated activity in question.
- This section does not apply if the regulated activity is accepting deposits.
This is perhaps the most concerning from the point of view of a lender, as being treated as a creditor is likely to leave their investments subject to the costs of administration - which are very high.
While the circumstances are different, this is being handled in a similar way to TrustBuddy, with investors exposed (on what are secure investments on Collateral) and subject to a lengthy administration process. One member of the P2P Independent Forum referred to this as "legalised theft", and another stating this calls into question P2P lending itself, with serious questions being asked of the way this has been handled by the FCA.
A selection of interesting points and questions that have been raised by members of the P2P Independent Forum. User michaelc commented:
More generally, the whole premise of P2P has been somewhat blown out of the water. How can any investor really know they are investing directly to the borrower?
Regarding the FCA, my understanding is that their main raison d'etre is ultimately to protect consumer investors and depositors. How are they doing that by appointing an administrator who first of all relegates us to the status of a mere creditor?
Regarding the lost accounts. This is simply incredible. Even a normal bog standard company has to keep records for (6 years I think). For these records to "disappear" suggest criminal activity. I would like to know who the IT provider(s) was and some more detail about when the instances were shut down, were they deleted etc?
User Momentus commented:
It's made me realise just how rapidly things can take a turn for the worse and just how flimsy these supposed "safeguards" clearly are if they can be so easily brushed aside.
The fact that any platform can just ignore required FCA permissions and totally dismantle the entire market safety structure that was put in place to protect investors so easily just blows my mind.
And who will pay the price heavily from this now? The supposedly "protected" investors.... The whole thing just stinks.
User m2btj commented:
BDO appear to be treating the wind down of Col as they would for any other company in administration. I would go as far as to say their thinking is not up to the task of winding down a P2P company like Col. The only winners, other than BDO, are the borrowers who appear to have stopped making loan payments. I have very little confidence in BDO at this stage.
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