Update on Choice

1. What has happened?

On 18th March 2020 we took the decision to cease trading on the Octopus Choice platform due to the extreme market conditions and high volume of investors trying to liquidate their investment.

At that time, there was £267 million of capital outstanding across 397 loans. Since then we have successfully retuned £260 million of capital back to investors. We have achieved this through sale of the loans to third parties and by working with borrowers to recover money for our investors.

In recognition of the lack of liquidity for investors, we have waived all fees from Octopus Choice over the last two years. This has allowed investors to earn an additional £4 million in interest on their loans.

We are now in a position to close the Octopus Choice product and return remaining funds to investors.

2. Why have we made this decision?

The remaining outstanding loan balance is £7 million. This is made up of 19 loans, all of which are more complex cases (and may involve us taking legal action against borrowers). This is typically a lengthy process with no guarantee as to how much will be recovered from these loans.

We don’t think this is a good customer outcome for our investors. We have therefore made the decision for Octopus Capital to use its own balance sheet to cover the outstanding loans and return funds to our investors.

These loans have all been valued by an independent expert and Octopus will use this valuation to acquire the loans. As a reminder, Octopus has invested 5% into every loan (‘first loss capital’) and therefore if any loan is valued at less than 95% of the original loan value, Octopus will lose all its first loss capital on that loan.

3. What Octopus product bought the loans?

There is no specific product buying the loans. They are being purchased by Octopus Capital, using our own balance sheet.

4. Why is it better that Octopus acquires the book versus another buyer?

The are two reasons why it is difficult to find a prospective buyer for the Octopus Choice loan book:

  1. The small size of the loan book significantly limits the number of buyers, who typically look for a size of over £100m. To consider a loan book of this size, a buyer would be looking to generate a significant return and will therefore offer a reduced price.
  2. The majority of loans are in default (i.e. the security has been sold or they are no longer paying interest) and therefore a buyer would be reliant on their ability to recover the outstanding balances. As a result, most buyers are only willing to purchase performing loans with a good history of repayment.

As part of the partial sale of the Choice book in March 2021, we explored willing buyers to purchase all loans, however this generated no interest. The independent valuer concurred with this rationale and confirmed that a prospective buyer was unlikely and if one were found, the price offered would carry a significant reduction on the current loan book.

We don’t think it is a good customer outcome for our investors to wait for the conclusion of a lengthy recovery process and it is for this reason that Octopus Capital has decided to use its own balance sheet to acquire the book and return money to investors.

5. Is the Regulator aware of this?

We have been in constant communication with the Financial Conduct Authority since March 2020 when we stopped trading on the platform. We have discussed our decision and the process followed with them.

6. When were final payments made?

Provided we had your instruction on file, the final payments were made on 19th May 2022 and all money should have reached your bank account or chosen ISA provider within 5 working days.

7. I have not provided an instruction to you, what happens now?

As of 27th May your money in Octopus Choice has been transferred to Octopus Investments, where it is held in a client money account. If you held an Octopus Choice IFISA, your cash is now held in an ISA within Octopus Investments. Please note, all your investment is held as cash and is not earning any interest.

To withdraw this amount, please email a copy of a recent bank statement showing details of your nominated bank account to [email protected].

Similarly, if you wish to transfer your ISA amount to another provider, please contact your new chosen ISA provider and follow the instructions set out by them. When completing the form, please note that your current ISA provider is Octopus Investments, 33 Holborn, London, EC1N 2HT.

8. How do I see my total capital loss?

The amount will be shown on your 2022/23 tax statement, which has been sent to you.

9. How can I offset my capital loss?

Capital losses in P2P can be offset against interest earned in the current tax year or can be carried back to offset against interest in the previous tax year if the loan was non-performing in that tax year. As all of the non-performing loans in Octopus Choice were deemed to be non-performing in 2021/22 carry back is applicable. Please contact your financial adviser or seek tax advice to ensure this guidance is applicable to your personal tax position. Octopus does not provide tax advice, for further information please visit https://www.gov.uk/guidance/peer-to-peer-lending#claiming-tax-relief-on-unpaid-loans

10. Where can I see my total return from Choice?

The total amount of interest you have earned is available on your closing statement, which will be sent to you by the 20th June.

11. How do I initiate an ISA transfer?

To initiate an ISA transfer, please contact your chosen ISA provider and follow the steps outlined by them. Please note that transfer instructions need to come from your newly chosen ISA provider.

12. How do I make a complaint?

If you have a complaint, then you can contact us by:

  1. Phone on 0800 294 6848
  2. Post at Octopus Co-Lend Limited, 33 Holborn, London, EC1N 2HT
  3. Email at [email protected]

If we are not able to resolve the complaint to your satisfaction, you may have rights to refer the complaint to the Financial Ombudsman Service. Further details are available from the Financial Ombudsman Service, at www.financialombudsman.org.uk. You may request a copy of our complaints-handling procedure at any time.