MYC4 will change its fee structure for borrowers for new loans starting in July. One main point of criticism had been that MYC4 by charging origination fees profited from any loan, regardless whether it was paid back or defaulted.
MYC4 has reacted. In future there will be no origination fees and only fees on the interest of the repayments. This uis a step in the right direction as the interests of MYC4 are now more aligned with the interests of the lenders. To make or increase profit MYC4 has to avoid and decrease defaults.
Quote of the announcement:
We have made a strategic decision with regards to the way MYC4 earns money by removing “closing fees” and only charging “interest fees” on the loans, when they are being repaid. That means that we put ourselves on the same side as the Investors on MYC4 only earning money when the Borrowers repay their loans.
With this change we want to signal that we believe strongly in the viability of the Businesses, and to align MYC4 earning with the earning of the investors and similar to investors be affected by any defaults and currency fluctuation.
Concretely, MYC4 will change the current income structure, where the Borrower is charged a flat fee of 2% of the loan amount, payable only when the loan is actually disbursed, and an additional fee of 2% (interest spread) when the loan is repaid on the basis of a declining balance. This corresponds to a total fee to MYC4 of approx. 3 percent of the total loan amount.
Instead, we will charge 6% interest commission. Considering a 12-month loan time, this 6% charge matches the 2% on initial balance plus the 2% on outstanding balance fees. The change will in most cases be neutral for the borrower.
In the same line, MYC4 encourages our Partners to shift their income from closing fees to repayment (interest) fees to show their belief in the quality of their portfolio towards investors. However, our Partners are not obligated to change their income structure, so it is up to each of them if and when they will change due to for instance their cash-flow situation.