Clouds on the Zopa Horizon?
I’ve now got over £30,000 invested in Zopa.
Nothing really untoward has been happening with my money and according to the latest figures, I’m earning a genuine five percent on my money. By a genuine five percent, I mean one that includes all the charges and bad debts. It also takes into account money that is in Zopa, but is not been lent out yet.
Of the 650 or so people I have lent to, only three are in trouble, with one a genuine bad debt and the other two limping along still making payments. That level is below the level forecast by the company and well below the levels experienced by the average finance company.
The graph below shows the rates at which money has been lent out on Zopa.
Zopa Rates to August 2009
Note that since mid-April rates have been rising, but over the last month or so, they have flattened off a bit and they may even have been falling slightly.
The graph below shows the amount of money requested.
Money Requested on Zopa - August 2009
Note how over the last six weeks, the amount of money requested by borrowers has dropped significantly.
Is this and the drop in interest rates linked to the banks being easier places to borrow money or does it reflect a typical lack of business because of the summer holidays? You could argue that the peak in June/July was caused by people borrowing money for holidays or new transport to take them there!
So there could be some fluffy cumulus on the Zopa horizon. We’ll see if business takes off in the autumn.
But a bigger thundery cloud has been seen courtesy of the Office of Fair Trading.
When I first got the letter saying that I must register because of Anti-Money Laundering Regulations, I thought it was a joke or at worst a try-on. Basically, reading the letter it just seems to be a catch-all to raise more money for this beleaguered government.
Why should I pay £115 a year, when my lending is controlled by Zopa and I only transfer money into them, by a straight transfer from my bank account? It is a yearly charge and would cut my rate from five to 4.7 percent.
If every lender on Zopa had to pay this tax, then it would not be the place for lesser mortals to get a decent rate on their money. But then Prudence and his ilk, have never liked private enterprise. Unless of course it benefits themselves!
It could be argued that Zopa is also a competitor to the various State Banks, that Prudence has saddled us with.
But despite all these clouds I will still be putting a percentage of my spare money into Zopa in the future.
The Artificial Cannabis Factory
I like this story.
Tom Butler has been hiring artificial flowers to people for fifty years. He was rather surprised when he got raided because someone had tipped off the police that all the luxuriant growth were cannabis plants.
On the other hand, the publicity about the story won’t be doing his business any harm!
Postal Strikes
I’m not sure whether I’ll get any mail today, as there is a postal strike in Suffolk.
But does it really matter? How often do you actually get a real letter these days? And when did you last get a postcard?
I think I’ve had about four in the last seven days and two of those could actually have been sent by e-mail, but thankfully some people like to be personally. The other two were a water bill, which asked on the outside if we’d like an electronic bill and a letter from the NHS enclosing a bowel caner test kit.
I think the last would be a difficult one to do by e-mail, but on the other hand it isn’t very urgent.
I used to know a guy who ran BT’s telephone service in East Anglia and he told me that every interruption in the Royal Mail service moves business away to other methods like phone and e-mail. It rarely comes back.
So what would happen, if we had a postal service that only delivered mail twice or even once a week?
In my view. Nothing!
BigZopa.com
I’m convinced that Zopa is working. I get a good return and judging by the number of people who apply for loans who have good credit ratings, it provides a service for discriminating people who need to borrow money. I tend to think that anybody can lend money to those with bad credit ratings.
At present Zopa has a borrowing limit of £15,000, but what if you created BigZopa.com and had a limit of £1,000,000. You would obviously need a lot more money to be paid in, but it would be an interesting place to put corporate money.
The economies of scale would mean that the system would cost about the same to run as the current system. But it would obviously cost a lot more for the due diligence.
But BigZopa.com will come.
Incidentally, BigZopa.com is available to register. Try Low Cost Names.
It’s All in the Article
The Sunday Times always tries to make the business pages more interesting by putting a lady on the front page, who is showing herself off. Last Sunday’s article about how Lord St. John of Bletso hosted a party in 2004 and 2005 for Ross Mandell, who is now charged with fraud in New York, was accompanied by one with Lady Bletso in a dress that to say it was low-cut would be an understatement. She was described in the article as a former Miss England.
Now, I have no knowledge of the couple except what I read in the media, but I don’t think I would be very happy with the article if I was them. After all they would appear to have been married since 1994, have four children and that Lady Helen is a doctor of medicine according to Wikipedia. She is also in her early forties and if nothing else, she certainly doesn’t show her age.
Luckily, I’ve never been described in the Press in anything but a complete and proper way, but I can understand how clipping out a few words and missing a few facts, can give a totally different view.
Zopa Demand Increases
I keep track of the amount of money that is requested on Zopa.
Over the last few months it has risen substantially, as on April 1, 2009 it was £3.5 million and now as I write on the 14th July it is hovering around the £10 million mark. In other words demand has increased three times in three and a half months.
Incidentally, interest rates have firmed up in that period and started rising towards the end of April.
I still only have the one bad debt and accounts in arrears are about the same they were in April.
This means that my return is still at present just over five percent. But that includes all the money tied up in Zopa and not just that lent out.
Rossminster
Rossminster was a company in the late 1970s and 1980s that were tax consultants. Others thought they were tax avoidance merchants, but as my memory is not that good and it relies on a couple of articles I read thirty years ago in The Sunday Times, I couldn’t possibly comment. But as they got full page articles in The Sunday Times, they were obviously significant or had very good friends.
You have to remember that in those days the top tax rate was eighty percent. Yes! Eighty percent! And therefore there was a massive industry that wasted some of the best brains in the City of London to save people money. Gordon Brown should realise that high tax rates never collect money, as those brains in the City are much better than those at his disposal. And infinitely better than his.
The Sunday Times or some other newspaper christened their methods the “Money-go-Round”, in that if I remember correctly money was moved between accounts and the theory was that if it wasn’t there long enough you couldn’t tax it. I’m probably wrong there, and if anybody knows the real story correct me.
But I know I’m right about lots of accounts and lots of transfers as I was asked to quote for a computer system for the company.
I was introduced to the company by a friend, who was incidentally one of the bank managers to Rossminster. I suspect he saw the potential for revenue for his bank from all those transfers. It would be typical, as he was one of the few bank managers I’ve ever met, who looked upon businesses in a radical way, that was for everyone’s mutual benefit.
In some ways he was a rogue, but a rogue on the side of the angels.
He finally left the bank, as a main board director, to care for his wife who was gravely ill.
One day, I’ll put a book together of the stories he told me. But I’ll wait a few years yet.
Zopa and Bad Debts
I’ve got one bad debt on Zopa and when calculating my returns I do not count it in any way at all. It might be recovered and more likely, I would be able to claim it against tax.
But HMRC are not being very helpful, as this post in the news on the Zopa site shows.
As those of you who follow our discussion forum will know, we are in conversations with the government about the tax treatment of lenders’ losses at Zopa. We had thought that lenders would be able to offset their losses from bad debt, as well as their Zopa fees, against their interest income from lending at Zopa. In that event the figure lenders would use in their tax return would be the ‘Total’ figure on the Zopa income statement.
However, HMRC advised us last year that they didn’t believe the losses could be offset, only the Zopa fees. That would mean that lenders should subtract the Zopa fees from the total of borrower and holding account interest and loan subsidy, but ignore the bad debt figure for the purpose of their 2008/09 tax returns.
We don’t believe this interpretation is remotely fair and have been lobbying the Government and Treasury accordingly. We are in continuing and constructive conversations with the Treasury and are hopeful that they will find a reasonable solution for the growing peer-to-peer lending industry in this country on the bases that 1) it will be fair in comparison with other lenders and 2) innovation in financial services is in everyone’s interest in these difficult times.
I’ve had various runs-in with HMRC in the past and tend to agree with the news. I should say that I’ve won most of these in the past.
We shall see!
Zopa as a Borrower
I have no experience of Zopa as a borrower, but it is worth stating how a loan is charged.
- There is an arrangement fee of £100.
- You are fully credit checked using the methods any responsible lender would.
- You can chose your repayment date to suit.
- You can cancel the loan at any time without any charges.
If you think this can help you, then take advice and try it.
But don’t blame me, if anything is not as I say here, or it all goes wrong.
Zopa as a Lender
I have been asked by several of my friends how I feel about Zopa, and how do you get started.
I should say that I would never tell anybody to use the site, before they have researched it in full. There are many excellent articles by respected financial journalists on the Internet. Some have told me that they have even invested themselves.
I only invest what I can afford to lose on Zopa. Most of my intial investment actually came from the sale of my late wife’s Porsche Boxster and the site has certainly performed better than that car would have. I used to love my two 911’s but a Boxster is like a fat pig compared to the gazelle of my Lotus Elan.
I started with small amounts of under a £1,000 and made sure I got the workings of the site under control, before I upped my levels to what they are now. You must do this, as you need to do the following.
- Check rates every morning, so that you are tracking the rates in the way you want.
- Check returned money every night, so that you make sure you are offering money for lending and it’s not sitting in your holding account.
- Make sure you understand the rules on how money is lent. For instance, note how lending offers inter-relate and that you can lend from two offers to the same person.
Did I make any mistakes?
Yes!
As I said in an earlier post, I set my limits too high at first and ended up with a bad debt of £200. I now have a maximum limit set at a thousandth of my total money, but that is probably a bit low. Somewhere between £50 and £80 would be a safe limit for most people. But this would be too high if you were only lending a total of say £2,000.
I am trying to get my average lending per lender down to under £50.
I would also make sure that you construct your lending offers, so that you can’t lend from two offers to the same person. I didn’t do this at first and I ended up lending far too much to some individuals. So now, I have one lending offer to A* and A rated borrowers and another for Youth. The two lending offers can’t lend money to the same borrower.
But as with anything to do with money, be careful. I would have used prudent, but Gordon Brown has long since proved that his definition of that word, is not the same as mine.
The Anonymous Widower 