On Prosper an individual that is both a borrower and a lender has been given the nickname blender.

Back in Febuary I wrote about blenders that were late on their borrower loan: Please Close Major Loophole for Deadbeat Lender/Group Leaders.

It seems that after a week or so of the Prosper Forums ranting about this issue and a suspension of a major (>100K) lender for impersonating a Prosper employee, that Prosper has finally said what it will do about the issue…

Here is a diret post from Shira posted on 8/14/2007 at 3:27pm…

Hi everyone,  

Thank you for raising the issue of late Lender-Borrowers to us.

As of today, all accounts of Lender-Borrowers who are 30+ days past due have been put on hold. This means these Lender-Borrowers won’t be able to place bids or send out group invitations on Prosper until their loans are brought current.

By the end of this year, we expect to have this process automated, but until then we will manually put 30+ days past due delinquent Lender-Borrower accounts on hold.

We are exploring whether and under what conditions state law will allow us to automatically apply lender funds if the lender is a delinquent borrower. We also expect to have an answer to that question by the end of the year.

Beginning with our next site update, borrowers who are also Prosper lenders will be able to apply their Prosper balances to their existing loans themselves, rather than have to move the money to their bank account first.

Sincerely,

Shira

We are exploring whether and under what conditions state law will allow us to automatically apply lender funds if the lender is a delinquent borrower. We also expect to have an answer to that question by the end of the year.

Hi again, 

At the present time, we feel we cannot keep a person from their money. However, all transfers on held accounts must be initiated by Prosper. It’s the same issue as the state law conditions: we are exploring whether state law allows us to truly hold funds or apply them to delinquent loans. I’m sorry if this is an unsatisfying answer. As I said above, we expect to have an answer to this issue by the end of the year.

As for group leaders who are also delinquent on their loans, they will also be addressed in the automated solution we are working on for year-end.

I hope this clarifies your questions.

Thanks,

Shira

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