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240 posts

Master Geek
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  Reply # 1225445 30-Jan-2015 15:38
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My lord, the cynicism in this thread is huge. How dare a new company try and do things differently.

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  Reply # 1225702 30-Jan-2015 22:54
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Jeeves: My lord, the cynicism in this thread is huge. How dare a new company try and do things differently.


They aren't - they are just copying what others have already done.

Usury is usury, whatever name you give the website!





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  Reply # 1225785 31-Jan-2015 10:42
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Geektastic:
Jeeves: My lord, the cynicism in this thread is huge. How dare a new company try and do things differently.


They aren't - they are just copying what others have already done.

Usury is usury, whatever name you give the website!


I guess as the business is P2P, then it's "facilitating" usury.

I don't "get" the business model:

"We target a prime bank grade customer that has got good credit and can afford to repay the loan, so we are declining probably 70-80% of applications right now," Roberts said.

"Prime bank grade" customers don't need Harmoney P2P lending at high interest rates - they can borrow money much more cheaply from a bank.
Out of the 20-30% of applications "approved", presumably some are paying the 39% rate cited - IMO this is at an end of the market where you're lending money to people who should not be borrowing money.  They also cop a massive risk-free 14% premium on those loans.

Actually - I suspect I do "get" the business model.  They avoid prudential regulation which applies to banks/finance companies, assume no risk by facilitating P2P borrowing for people who shouldn't be borrowing money anyway.  This in a market with low interest rates and ease of borrowing (and hence unprecedented high levels of consumer debt) suggests to me that they're preying on the vulnerable on both sides of the equation.

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  Reply # 1225794 31-Jan-2015 11:14
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^^^

That sounds like loan sharking to me.




Whatifthespacekeyhadneverbeeninvented?


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  Reply # 1225816 31-Jan-2015 12:04
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It's interesting that there appears (and I may be wrong) to be no law against usury and loan sharking in NZ.

The first anti-usury laws in the UK were enacted in the 1600's!

I'm not sure why we collectively appear to be happy for such activities to take place.





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  Reply # 1225818 31-Jan-2015 12:12
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Geektastic: It's interesting that there appears (and I may be wrong) to be no law against usury and loan sharking in NZ.

The first anti-usury laws in the UK were enacted in the 1600's!

I'm not sure why we collectively appear to be happy for such activities to take place.


IIRC, there was some talk a few years ago about regulating the amount of interest that sharks could charge, but nothing came of it. They can charge any amount they like as far as I know.




Whatifthespacekeyhadneverbeeninvented?


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Master Geek
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  Reply # 1225887 31-Jan-2015 14:20
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I recon it is a good thing. It is competition to banks. Hopefully, there will be some competition to Harmoney too. 
In Uk, similar companies will cover your loss in a borrower fails to pay. Hopefully, this will come to NZ. 

"The most obvious risk is that a borrower fails to pay you back. However, several of the sites operate a fund or similar scheme that will cover a lender's losses in the event that a borrower is unable to repay. "
http://www.theguardian.com/money/2014/feb/15/peer-to-peer-lending-nicola-horlick



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Master Geek
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  Reply # 1225975 31-Jan-2015 17:05
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By the way, harmoney is not owned by Trademe. Trademe bought 14% of it. 

http://www.interest.co.nz/business/73534/trade-me-pays-77-million-15-stake-peer-peer-lender-harmoney

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Master Geek
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  Reply # 1227417 2-Feb-2015 08:59
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Geektastic: It's interesting that there appears (and I may be wrong) to be no law against usury and loan sharking in NZ.

The first anti-usury laws in the UK were enacted in the 1600's!

I'm not sure why we collectively appear to be happy for such activities to take place.


http://www.consumeraffairs.govt.nz/legislation-policy/changes-to-credit-laws


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  Reply # 1227438 2-Feb-2015 09:46
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Jeeves:
Geektastic: It's interesting that there appears (and I may be wrong) to be no law against usury and loan sharking in NZ.

The first anti-usury laws in the UK were enacted in the 1600's!

I'm not sure why we collectively appear to be happy for such activities to take place.


http://www.consumeraffairs.govt.nz/legislation-policy/changes-to-credit-laws



Well, some improvement is better than none but I'd hardly describe a voluntary code as much of a useful thing in this context.

Where are the legal proscriptions on interest rates, for example?





mdf

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  Reply # 1227465 2-Feb-2015 10:15
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Geektastic:
Jeeves:
Geektastic: It's interesting that there appears (and I may be wrong) to be no law against usury and loan sharking in NZ.

The first anti-usury laws in the UK were enacted in the 1600's!

I'm not sure why we collectively appear to be happy for such activities to take place.


http://www.consumeraffairs.govt.nz/legislation-policy/changes-to-credit-laws



Well, some improvement is better than none but I'd hardly describe a voluntary code as much of a useful thing in this context.

Where are the legal proscriptions on interest rates, for example?


There aren't any. An interest rate cap has been proposed several times, but the government/officials have always vetoed it on the basis that it acts as the default interest rate everyone will charge (for the worst borrowers, at least). Though the counter argument that it is better charging everyone - say - 60% rather than 600%.

mdf

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  Reply # 1227471 2-Feb-2015 10:19
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Fred99:
Geektastic:
Jeeves: My lord, the cynicism in this thread is huge. How dare a new company try and do things differently.


They aren't - they are just copying what others have already done.

Usury is usury, whatever name you give the website!


I guess as the business is P2P, then it's "facilitating" usury.

I don't "get" the business model:

"We target a prime bank grade customer that has got good credit and can afford to repay the loan, so we are declining probably 70-80% of applications right now," Roberts said.

"Prime bank grade" customers don't need Harmoney P2P lending at high interest rates - they can borrow money much more cheaply from a bank.
Out of the 20-30% of applications "approved", presumably some are paying the 39% rate cited - IMO this is at an end of the market where you're lending money to people who should not be borrowing money.  They also cop a massive risk-free 14% premium on those loans.

Actually - I suspect I do "get" the business model.  They avoid prudential regulation which applies to banks/finance companies, assume no risk by facilitating P2P borrowing for people who shouldn't be borrowing money anyway.  This in a market with low interest rates and ease of borrowing (and hence unprecedented high levels of consumer debt) suggests to me that they're preying on the vulnerable on both sides of the equation.


While there isn't prudential regulation, there is "conduct" regulation under the Financial Markets Conduct Act and FMA - basically regulating the way the market works, rather than the amount of money you have to hold against your borrowing. See http://www.fma.govt.nz/help-me-comply/peer-to-peer-lending/

This makes sense though. Banks are regulated because of their borrowing (i.e. customer deposits that are repayable), not their loans (though there is of course an assessment of the various borrowing lending ratios). Finance companies that just lend money (i.e. don't raise it from the public) aren't subject to prudential regulation either.

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Ultimate Geek
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  Reply # 1227473 2-Feb-2015 10:21
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There should be some legislated restriction on how interest rates are displayed.  I remember "Super Loans" billboards in Wellington advertising an 8% interest rate and thinking "actually that doesn't sound too bad" until I found out that was 8% per week - north of 500% per year!

A real "harmony" P2P lending site would lend to people that banks/etc wouldn't, at reasonable interest rates.  Therefore it wouldn't make rapacious profits, so good luck finding venture capital to back it.

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  Reply # 1227474 2-Feb-2015 10:23
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mdf:
Geektastic:
Jeeves:
Geektastic: It's interesting that there appears (and I may be wrong) to be no law against usury and loan sharking in NZ.

The first anti-usury laws in the UK were enacted in the 1600's!

I'm not sure why we collectively appear to be happy for such activities to take place.


http://www.consumeraffairs.govt.nz/legislation-policy/changes-to-credit-laws



Well, some improvement is better than none but I'd hardly describe a voluntary code as much of a useful thing in this context.

Where are the legal proscriptions on interest rates, for example?


There aren't any. An interest rate cap has been proposed several times, but the government/officials have always vetoed it on the basis that it acts as the default interest rate everyone will charge (for the worst borrowers, at least). Though the counter argument that it is better charging everyone - say - 60% rather than 600%.


Just cap it as a percentage above OCR.

Apparently there is a cap in Australia.





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Ultimate Geek
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  Reply # 1227475 2-Feb-2015 10:24
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yep no interest in being a loan shark - i already despair at their proliferation esp in low income areas

lending to people who in all likelihood cannot afford said loan, at exorbitant rates - does not align with my ethics

each to their own i guess.....

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