FREQUENTLY ASKED QUESTIONS
Are you authorised and regulated by the FCA?
Yes – Octopus Choice is the trading name of Octopus Co-Lend, which is regulated under full permissions by the FCA, registration number is 722801.
How do you make your money?
Unlike some investment products, we don’t charge an up-front fee or annual management charge for investing in Octopus Choice – the sum you invest is exactly the sum that will be invested into loans. Instead, we make our money in two simple ways: We charge borrowers – the people who the money you invest is lent to – a monthly fee of up to 0.35% to cover the cost of managing their loan. Octopus has an experienced, award-winning and highly qualified lending team who will assess all loan applications on your behalf. The monthly fee pays for their expertise and effort, and is paid for by the borrower – it's taken from the overall 'borrower rate' that they pay – which we show on our statistics page. Importantly, we only earn this fee once interest has been paid to you, the investor. If a loan stops performing – for example, if a borrower starts to miss payments – we’ll stop earning the fee until any money you’re due has been paid. We also earn interest on our own ‘first loss’ loans. We’re so confident in the quality of our loans that we put our money where our mouth is and invest with you in every single one – and at higher risk. This means that, for each loan, you get your capital back before we get ours, while you also receive your share of the interest first. In other words, if a loan were to stop performing as expected, all of the interest ever earned by us on that loan would be sacrificed to pay any remaining interest that’s due to you. Because we’d lose our money before you, we receive a higher return – of up to 30%, depending on the nature of the underlying loan. This interest is also drawn from the overall 'borrower rate' that we charge. There may also be early repayment or extension fees – for example, if borrowers choose to repay their loans early, or extend the repayment beyond the original terms. Ultimately, we think it’s a fair way of letting you earn a great rate, all the while knowing that your money is invested in high-quality secured loans that we source, administer and invest in, too.
Communicating with us
How can I get in touch with you?
If you’ve got any questions, comments or feedback we’d love to hear from you. You can... • Give us a call: 0800 294 6848 (you’ll always speak to a human) • Send us an email: email@example.com • Or you can even pop in to see us at our offices, if you like: 33 Holborn, London EC1N 2HT
How do I make a complaint?
We try and get it right every time – but if you're unhappy, then do get in touch.
How is my personal data used?
Will I receive statements?
We’ll send you monthly email statements showing your balance and any transactions such as new investments or payments of interest.
How much do you invest in each loan?
Octopus contributes 5% to each and every loan. In each loan, you'll get your money back before us – and earn your interest first, too. In the unlikely event that a borrower failed to repay, we'd lose all of our money before you lost any of yours. We'd also sacrifice any interest we'd ever earned on that loan to ensure you get back as much as possible. By putting our money where our mouth is, not only are we are showing just how confident we are in the quality of the loans that we're making available – we're also giving you an extra layer of protection should anything go wrong.
About the borrowers
Who do you lend my money to?
We lend your money to carefully selected borrowers seeking finance, who we can be confident will be able to repay, and who own valuable assets (initially residential property, but we’re exploring commercial property, too) that can be sold in the event that they can’t. We’ve got some stringent criteria for our loans, to make sure your money is as secure as it can be – see our answer to the next question for more details...
What are your criteria for lending?
We only allow customers to invest in those loans that we would be prepared to invest in ourselves. Then we back it up by doing just that: investing, with you, in every single loan. We’d also lose our money before you lost any of yours – so it goes without saying that we only make loans if we’re confident we can get the money back. To be sure we can, we have some pretty stringent criteria. First, we only make asset-backed loans. That is, loans that are ‘secured’ against a physical asset, owned by the borrower, which can be sold in the event that they fail to repay. To begin with, loans will be secured against residential property, but in time we might move into other sorts of similarly secured assets. We also only lend at conservative ‘loan to value’ ratios of, at the most, 70%. In other words, a £700,000 loan would have to be secured against a property worth £1 million – giving a substantial 30% cushion against any fall in the value of the property. Before making any loan, we conduct thorough due diligence on the underlying assets – including, where necessary, an independent professional valuation. We also conduct in-depth analysis of each borrower’s financial position, assessing their credit history, undertaking comprehensive identity and fraud checks, and making sure we're confident in an ‘exit’ (i.e. that they'll be able to pay back the loan).
Opening and accessing your account
How do I open an account?
Easy – just follow these simple steps and you'll be up and running in no time.
Can companies use Octopus Choice?
Absolutely. The process for this is slightly different, though. Simply email firstname.lastname@example.org and we'll take it from there.
Do you accept applications from overseas?
Yes we do! But it might take a couple more steps. The money will need to come from a UK bank account, and you will need to supply both a photo ID and proof of address. Also, if you pay tax in any other jurisdictions, we will need your tax numbers here, too. If you're unsure whether you're eligible or not, get in touch: email@example.com
How do I change my account details?
You can edit your details – including password – from within the ‘profile’ section of your account.
I've forgotten my password – can I create a new one?
Don't worry, you can reset your password at any time. When logging in, just click 'forgot?' in the password field, and we'll send you a link to your registered email address with steps on how to create a new one. Bear in mind that you'll need to have verified your address by clicking the link in the email that we sent to you straight after signing up.
Building your portfolio
How is my money allocated to loans?
When you pay money into your account, it will be automatically placed in a queue to ‘buy’ parts of individual loans made to different borrowers. 'Loan parts' are bought and sold automatically and regularly, on a first-come, first-served basis – meaning if you deposit your money before someone else, we’ll make sure all of your money starts earning interest before them. When allocating your money to different loans, we always start with one that, proportionally, has the least money assigned to it. We will then work backwards to the loan that is most well-funded.
What happens when loans in my portfolio are repaid?
Over time, it’s likely that individual loans in your portfolio will be repaid, sometimes even earlier than expected. At that point, the money that was previously invested in those loans will be automatically placed in the queue to be reinvested into other ones. The money could be reinvested into new loans entirely, or into ones that are already in your portfolio; it all depends on which loans are open for investment at the time, and how well funded they are (see above).
How many loans will my money be spread across?
To balance your exposure to risk, we'll always try and invest your money across 10 loans or more. Sometimes we can’t do that straight away, so your money will wait in the queue to be invested on a first-come, first-served basis. It’s possible that your portfolio could become more concentrated over time – for example if loans get repaid, and the money that was previously allocated to them gets reinvested into loans that are already in your portfolio. So that you don’t become over-concentrated in a few loans, we may periodically balance out your portfolio if more than 10% is held within a single loan. We’ll do this by buying back your investments and spreading them out again across the loans you were previously invested in, plus enough new ones to ensure you’re sufficiently ‘diversified’.
Funding your account
How can I fund my account?
You can invest through Octopus Choice via debit card, cheque, direct debit or bank transfer.
How long will it take for my money to be invested?
We’ll do our best to get your money working as quickly possible, but we can’t guarantee that it'll happen straight away. That’s because we always try and invest your money across 10 loans or more – sometimes we can’t do that straight away, so your money will be placed in a queue and invested on a first-come, first-served basis. We show on our statistics page the current queue time (see below for what we mean by this). Bear in mind that the rate could change while your money’s waiting to be invested; the rate you’ll earn will depend on the exact loans that are in your portfolio.
Can I make regular payments?
Yes! You can set up regular monthly payments into your Octopus Choice account, either from your debit card, or from your bank account. Visit the 'monthly investments' section of your profile to get started.
Can I use a credit card?
Unfortunately we don’t accept credit cards, as we’re not allowed to accept investments made with borrowed money. Instead, you can invest by debit card or bank transfer.
What does the current queue time show?
This shows how long ago the last person who was served first joined the queue. It doesn’t show how long that person was waiting for their money to be invested – which could be misleading for those behind them in the queue – but instead shows when they first made their investment request.
The risks – and how we mitigate them
Are my funds protected by the Financial Services Compensation Scheme (FSCS)?
No, it’s important to know that your investment is not covered by the Financial Services Compensation Scheme (FSCS).
What are the risks associated with Octopus Choice?
When you invest through Octopus Choice, your money is lent to carefully selected borrowers seeking finance. As with any investment, there are certain risks: • Your investment is not FSCS protected • We can’t guarantee instant access • It could take time to spread your money It's important you understand and are comfortable with these risks before choosing to invest – see our risk statement for full details, plus information on how we mitigate them.
What would happen if you went into insolvency?
We’re subject to regular compliance reporting and checks, and are a financially healthy firm with over £6 billion of assets under management – but in the very unlikely event that we should cease trading for any reason, we’re required by the Financial Conduct Authority (FCA) to hold additional capital for an orderly wind-down. Any money that hasn’t yet been allocated to loans will also be held in trust within segregated ‘client money’ bank accounts at HSBC; in the unlikely event of our insolvency, this money would be inaccessible to us – and covered by FSCS protection. The security charge over properties is also held in trust for you.
How do you manage any conflicts of interest?
We treat all of our customers fairly, and don’t favour new customers over old, or vice versa. We deal with all requests to deposit or withdraw money on a strictly first-come, first-served basis. We do make similar types of secured loans available for investment by other customers, through different products – but loans are allocated between these different products according to agreed criteria, and overseen by a separate allocations committee. We also lend with our customers and put our investment at risk before yours, to align our interests. Because you get your initial investment back before us, and also earn your share of the interest first, we earn a higher rate of interest on our loan investments. We think it’s a fair way of giving you a great rate, all the while knowing that your money is invested in secured loans that we source, administer and invest in, too.
What happens if a borrower fails to repay their loan?
We have a clear process for dealing with missed payments. First, we notify the borrower and their solicitor of our intention to instruct lawyers. Our experience shows that most non-performing loans are resolved with the threat of legal action, without having to escalate further. However, if the borrower continues to delay repayment, we’ll begin legal proceedings and, if necessary, will repossess the property to recover what’s owed to you. Remember, we never lend more than 70% of the value of the property – giving a substantial 30% cushion against any fall in the value of the property. And don’t forget that we also invest alongside investors in every loan, and are the first to lose money if anything went wrong. That’s how confident we are. While you won’t be able to access the money that’s invested in that loan, you’ll continue to earn interest on it (though how much interest we can pay will depend on how much money we recover from the borrower). You’ll be able to withdraw the rest of your portfolio as before.
How do you mitigate the risks involved?
We take risk seriously, and do everything we can to ensure your money is as secure as can be: 1. We invest with you in every loan, and would lose our money first: putting our money where our mouth is, and protecting your investment with ours 2. We conduct thorough due diligence: only making a loan if we’re confident we can get the money back 3. We only make ‘conservative’ loans: securing all loans against real assets – and ensuring we have a substantial cushion in case the value of that asset falls 4. We pursue any missed payments or defaults on your behalf: repossessing a property, if necessary, to recover what’s owed to you It’s important that you understand and are comfortable with the risks involved in Octopus Choice before choosing to invest. For a full explanation check out our risk statement.
What’s the 'target rate' and how is it calculated?
The 'target rate' is simply the blended average interest rate of all loans that are currently open for investment. It shows the estimated return you could expect to receive by investing in the platform at a given time, and is updated regularly. Your actual return could be higher or lower, depending on how much you invest and the exact time at which you do so. Remember, as an investment, there is a possibility that you get back less than you put in.
How is my interest earned?
When you invest through Octopus Choice, your money is lent to carefully selected borrowers seeking finance. In effect, you get to ‘be the bank’, lending your money to those who need it, to earn higher rates of interest. The money that you pay into your account will be used to ‘buy’ parts of individual loans made to different borrowers. Each ‘loan part’ will have its own set of terms (for example length of loan and interest rate) which, when blended together, will provide you with an overall target rate that’s personal to you.
How is my personal rate calculated?
Your personal rate is the average interest rate of all loans in your portfolio. It's personal to you and depends on how much you invest, and the exact time at which you do so. It'll also change over time as loans come to the end of their term ('mature') and your money gets reinvested into new loans with different interest rates.
When is interest paid?
Interest is paid monthly, and will be earned as soon as we allocate your money to loans – but remember, this could take time.
Can I choose how to take my interest?
Yes! We like choice (as you'd imagine). You can either have your interest automatically reinvested – so you can earn interest on your interest – or paid into your bank account each month (think of it as another income). If you choose to automatically reinvest, your money will join the queue along with all other new investments. Just select which you'd rather from the 'My Investment' section of your account. Remember, interest that's reinvested will be treated as a new payment and so will potentially earn interest at a different rate, depending on the loans that are open for investment at the time. This will change the overall rate that you receive ever so slightly.
How does a change in the headline rate affect my investment?
The headline rate shown on our website is the average interest rate of all the loans currently open for investment. The rate you earn, on the other hand, is tied to the individual loans in your portfolio and so isn't affected by any change to the headline rate, only to your loans. The exception is on any new investments – including interest payments. The rate they earn will depend on the particular loans they're allocated to at the time, which may well be different. This could therefore change the overall rate you earn. Likewise, when a loan 'matures' (comes to the end of its term), the money allocated to it will then get automatically invested into new loans – again, with their own rates.
How do I withdraw money?
To make a withdrawal request, just click 'withdraw' from your investment page and choose the amount. Remember that, though we'll do our best to give you access to your money as soon as possible, we can't guarantee instant access. See the question below for more details...
How long does it take to withdraw money?
Withdrawing money from Octopus Choice means selling your ‘loan parts’ (the parts of individual loans that your money is allocated to) to somebody else, or – in the worst case scenario – waiting for them to mature. Provided there are people to buy your loans, you should get your money in a matter of working days. If there aren’t, and if we can, Octopus will buy your loan parts, just to speed up your withdrawal. We treat withdrawal requests on a first-come, first-served basis: if we can’t give you the full amount, we’ll place you in a queue. In the meantime, you’ll carry on earning interest on the remaining amount. Unfortunately, in the same way that we won’t invest your money in any loan that we know to be non-performing (for example, if the borrower has missed interest payments), we can’t buy or sell a non-performing loan, either. If one of your loans stops performing as it should, we’ll do our best to give back what’s owed as soon as possible – although this may take some time.
Does it cost to withdraw?
No – there's no cost to withdraw. After all, it's your money...
Do I have to pay tax on my interest?
Yes, as with other savings and investment products, the interest you earn through Octopus Choice is paid gross of tax. You may have to report (and pay tax on) it to HMRC at the end of each financial year. However, it’s worth remembering that basic rate taxpayers are now entitled to earn £1,000 of interest tax free each year (£500 for higher rate and, unfortunately, nothing for additional rate). Once we have our full authorisation from the regulator, we'll also be able to offer Octopus Choice as an ISA – meaning you'll be able to earn tax-free interest on new investments up to £15,240 (as well as on the total balance of any existing ISAs you choose to transfer in).
When will the Octopus Choice Innovative Finance ISA be available?
We now have full authorisation from the regulator to offer an Innovative Finance ISA, and we’re working hard to get it up and running. The Octopus Choice ISA will initially allow interest to be earned tax free on new investments of up to £20,000 in the 2017/18 tax year; before later allowing transfers in from any existing ISAs that you may hold. It’ll be going live to our current customers first – so, what are you waiting for? Sign up now to make sure you’re first in line!