Lender Funds Under Management Fee
What is the lender fee?
During this period of abnormal market conditions, we have taken the decision that we must apply a Lender Membership Fee, which will be a Funds Under Management Fee of 0.9% per annum, which is the equivalent of 0.075% per month, for at least three months. The first fee will be charged on 1st May 2020. This was not a decision taken lightly and is the minimum fee that we could charge.
Who does the fee apply to?
The Funds Under Management Fee applies to all investors operating under our Terms and Conditions during this period of abnormal market conditions.
How does the fee work?
The fee will be charged on 1st of the month, starting on 1st May 2020. It will be calculated throughout the month based on your funds under management but deducted as a reduction of the actual interest that you receive. The fee applies to your funds under management in the prior month.
There is no lender fee applied to loans in default or recovery (as those loans have existing special arrangements for default interest). There is also no fee applied to cash holdings.
Where a borrower misses a payment and you do not receive your interest payment that month, you will not pay fees on those loans in that month. Those fees will accrue along with your interest and only fall due to be paid once you receive your interest payment for that loan, provided there is a lender fee still in place that month.
How do you calculate the fee?
Each lender will accrue a fee per loan, per investment account, on a daily basis using this formula:
[Value of holdings in the loan at the end of the day] x [Monthly Funds Under Management Fee] / [Number of days in the month].
Let’s assume a lender has an investment balance of £1000 in a loan prior to or on 1st April 2020. We will apply the Funds Under Management Fee of 0.075% and the daily fee accrued in April (i.e. a 30-day month) would be calculated as follows:
£1000 x 0.075% / 30 = 2.5 pence per day
Which works out as a total of 75p accrued for the month of April.
When accrued fees fall due to be paid
As we’ve described above the accrued fee for a loan will only fall due to be paid where the lender interest on that loan has been received.
Let’s assume a lender had an investment balance of £1000 (prior to or on 1st April 2020) in each of three loans, and they held this level of investment for the rest of the year.
- Loan A makes their payments on time every month, so the lender will be charged a fee of 75p on the 1st of every month, starting on 1st May for the fees accrued during the month of April.
- Loan B misses their April and May repayments and you do not receive your interest payment. However the borrower makes their full payment in June, including both April & May’s payments. Whilst the fees are still accrued during April, May and June, no fees for this loan are taken until 1st July, at which point we would charge £2.25 to cover the fees accrued for the previous three months (i.e. 75p from April + 75p from May +75p from June).
- Loan C misses their April repayment, and is recorded as ‘in default’ in May. All fees accrued that have not fallen due will be discarded, and no further fees will be accrued for that loan.
How do you take the fee?
Lender Funds Under Management Fees are calculated on a daily basis over the course of a month and paid on the first of the following month.
For investors in the Access Accounts, the fee will be taken from Manual Lending rate of the loan and the amount left will be used to pay the target interest rate and any excess used to top up the Provision Fund. If the amount of interest left net of the fee is less than the target interest rate, then that lower rate will be paid. So it is possible that Access Account lenders may see a reduction in their actual interest rates paid versus target rates. Please note that Access Accounts interest payments will be processed manually during this time, this means that they will still be paid on the 1st of each month, however it may be later in the day than you have experienced previously.
For Manual Lending Account investors, any interest payments due to be paid to a lender whilst they have an outstanding fee balance from the first of each month would be used to pay the fee first, with remaining interest paid to the lender. This is also how other discontinued accounts will operate like the Property Secured Account etc.
If you’re investing across both standard and IFISA accounts they will be treated separately, therefore if you accrue a fee in your IFISA account, it won’t be taken from interest in your standard account or vice versa.
Is the fee tax-deductible?
We’re unable to offer tax advice, however these fees will reduce the interest that you are paid. The reduced interest that you are paid will be shown on your tax statement. We recommend that you speak to a professional tax adviser if you are unsure.
How can I see what fees I’m being charged?
Lenders using the Manual Lending Account or discontinued accounts will be able to see their total outstanding fee, which is the amount of fees that have fallen due, but have not yet been paid. This will decrease over the month as you receive interest payments and the fees are taken. By default this will be switched off in your dashboard, but you can easily make this statistic visible in your dashboard settings.
How long do I need to pay these fees?
Whilst the ability for Assetz Capital to charge the fee, as stated in our Terms and Conditions, is not time constrained, we hope and expect that it will only need to be a short-term measure. We’re unable to confirm how long the fee will be applied but we’ll continue to keep you updated over the coming months.
It’s currently stated to apply for May, June and July whilst we assess the market conditions and we hope to reduce and eventually remove it as quickly as is practical.