Zopa’s 300,000th Member
In their July Newsletter, Zopa has said this.
In the last week, we also recruited our 300,000th member – meaning that we’re now officially bigger than Belfast!
That’s a lot of members. It would be interesting to know how many have actually lent or borrowed.
But that figure does illustrate how many people now know about the concept.
Is it Usury?
I was rather surprised that Provident Financial, who reported good results this week, charge some of its customers an interest rate of up to 545% on loans. Martin Narey of Barnardos is not amused. And neither am I!
But to criticise the company is wrong, as they are merely filling a gap in the financial services market, that should be catered for by micro-finance companies and credit unions. As to the latter it has always puzzled me why they have such a low profile in this country, compared to the United States. They seem to be ideal for the times and also for lending small amounts of money in more stretched communities. Especially, as any profits stay in that community.
Could it be that the regulations are framed to protect the banks? After all, no credit union has ever taken the Chancellor of the Exchequer to the British Grand Prix or other major sporting event. And they probably don’t pay anything to the government, except perhaps VAT and Income Tax for employees.
At least though, the spam I used to get from doorstep lenders like Providential has stopped. (They didn’t send any incidentally! Or not to me at any rate!) This offered me loans at high rate and it came from spam companies in the United States. However, a letter to my MP, who talked to the government, stopped the process in days.
There’s another moral in that tale. Don’t underestimate the power of your MP! If you have a problem write to them!
Gambling, Zopa and On-Line Bots
A strange thing is that since I’ve been using Zopa, I have cut down my gambling on things like horse racing.
I think that using Zopa is a bit like on-line gambling with a bit of the same buzz, as you check the results of what has happened every day about 10:30 at night. Or it certainly seems so to me. But perhaps I’m more an information man, than a true gambler.
Whilst we’re looking at gambling, there is an interesting site, which talks about on-line bots, that do automatic processing on gambling, foreign exchange and other sites.
Not for me!
Computers are great slaves, but bad masters.
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.
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.
Money-Go-Round
I remembered this term about Rossminster and just out of curiosity I searched the Internet for the term.
I came across this piece on the Bank of England’s web site, with that title. Judging by the picture I think it is about informing children about how banks work.
Banks work because we trust them. We are confident that they will keep our money safe, make it grow and give it back to us when we ask for it. But did you know that as soon as we give the bank our money, it gives it to someone else? This is because a bank is like any other business, the difference being that their product is money. Banks use money to make money.
Make your own conclusions.
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 