Peer-to-peer analyst 4th Way is investigating whether Lending Works users have actually lost money as a result of the platform introducing negative interest rates.
Lending Works paused lending last year and introduced a period of negative interest rates at the end of October 2020 so that it can channel more money into its provision fund to mitigate anticipated higher credit losses.
It resumed lending in January 2021 but said the negative interest rates were still required for two of the annual cohorts, 2017 and 2018.
Some investors have complained on the P2P Independent Forum and in emails to Peer2Peer Finance News that this has left them with losses.
But 4th Way head of research Neil Faulkner (pictured) said the platform’s chief risk officer Inês Maia had told him interest from previous years has outweighed recent negative interest rates for all investors.
Faulkner said he is keen to know and see evidence if this isn’t the case.
“Some individual lenders are telling 4thWay that they reckon they were sitting on overall losses, at least temporarily,” he said.
“Up to this point, none of them have provided us with data to support these statements.
“Lending Works’ own data and information provided to 4thWay has been reliable over the years, so I have no reason to doubt what Lending Works’ top risk officer says at this time.
“Lending Works tells us it applied negative interest rates only to loans that have earned prior interest, so that the negative rates offset some past earnings.”
Faulkner said that since no lenders have had negative rates on any individual loan in excess of the money they lent on it, or provided evidence against this, they have not lost money.
He said it was possible that lenders who think they have suffered a loss are looking at their annual results rather than the overall performance of their investments.
Faulkner added that there was also a chance that Lending Works is incorrectly explaining how it applies negative interest rates.
“Just possibly, it meant to say that some individual loans have lost money by being hit with more negative interest than prior interest earned,” he said.
“They might have meant that, on any lender’s batch of loans, no-one has lost money overall.
“Even so, in that hypothetical situation, that’s still an overall profit on investments for all lenders. Albeit not as satisfying.”
Lending Works has been asked for comment.