Lender Membership 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 of 0.9% per annum, which is the equivalent of 0.075% per month. 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.
Important update: We are pleased to announce the staged reduction and complete removal of the temporary lender fee over a period of four months. Starting in February 2021 we'll reduce it by 25%, 50% in March, 75% in April and 100% reduction down to zero again in May onwards. Further information can be found under ‘How long do I need to pay these fees?’
Who does the fee apply to?
The Lender Membership 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 is charged on 1st of the month and applies to your invested funds in the previous month. The fee is calculated throughout the month and is deducted as a reduction of the actual interest that you receive.
Please note that the lender fee does not apply to loans in default or recovery (as those loans have existing special arrangements for default interest) and there’s 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 Lender Membership 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, provided there is a lender fee still in place that month.
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 Membership 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?
We are pleased to announce the planned staged reduction and complete removal in the temporary lender fee over a period of four months, starting on 1st February 2021.
The Lender Membership Fee of 0.9% per annum or the equivalent 0.075% per month will be reduced by:
- 25% in February (0.05625% per month), deducted from March interest payments
- 50% in March (0.0375% per month), deducted from April interest payments
- 75% in April (0.01875% per month), deducted from May interest payments
- 100% in May, no deductions from June onwards
What does this mean for my investments?
Access Accounts and Closed Accounts
If you have funds invested in the Access Accounts or any of our closed accounts (GBBA1, GBBA2, PSA or GEA), the fee is taken from the Manual Lending rate of each loan and the amount left is used to pay the advertised target interest rate, with any excess amount used to top up the Provision Fund.
The removal of the fee will therefore increase the amount of funds directed towards the Provision Fund each month.
Interest payments for the Access Accounts are paid on the 1st of each month and throughout the month for the closed accounts (based on the funds invested via the account in the prior month), so the initial 25% reduction in the fee will take place in February (deducted from March interest payments), with a 50% reduction in March (deducted from April interest payments), 75% reduction in April (deducted from May interest payments), with complete removal of the fee in May onwards, and therefore no deductions from interest payments from June onwards.
Manual Lending Account (MLA)
If you have funds invested in the MLA, any interest payments due to be paid to you whilst you have an outstanding fee balance from the first of each month is used to pay the fee first, with the remaining interest paid to you.
Where a borrower misses a payment and you do not receive your interest payment that month, you do not pay fees on those loans in that month. Those fees accrue along with your interest and only fall due to be paid once you receive your interest payment for that loan, and will be charged at the monthly rate at which they were accrued.
Any fees that have been accrued whilst the lender fee was in place but fall due to be paid once the fee has been removed will not be deducted from any future interest payments.
If you wish to see your outstanding Lender Membership Fee amount each month, simply visit the settings area of your dashboard, and turn on the 'Outstanding Fee' option.