Prosper the p2p lending company is getting tough on late borrowers.
The “New Agency Test” is taking an interesting turn… Prosper is going to sue. I just received the following email from Prosper.
Related StoresThe purpose of this email is to inform you of your right to choose what action you would like to take with regard to the accounts of the legal collection test currently underway.
Of the original 74 loans in the legal test, 68 remain (6 loans have fallen out due to such things as curing or bankruptcy filings). In order to present the strongest case, our law firm believes that it is best for Prosper to be the official owner of the loan when suit is filed. As such, we have developed the following process to accomplish this:
You currently hold promissory notes on 6 loan(s) in the test group (loan numbers comprising the test group listed in Exhibit 1). As of January 15th, 2008, the total Gross Amount Due to you on these loans is $325.26. If the loans had been sold in the December debt sale, they would have brought you $33.11 in proceeds.
The total of the 68 loans has a gross amount due of $735,709.66 and would have sold for $73,506.03. Additional loans may be removed from the pool, for such reasons as curing or declaring bankruptcy prior to 1/23/08 – the projected pool creation date.
You may choose to accept the $33.11 (the “debt sale amount”) for your loans now or to receive a pro-rata share of the net recoveries of this legal test pool. The pro-rata share would be based on the gross amount due on your Notes divided by the gross amount due to all lenders who choose to be in the test, calculated as of January 23, 2008 (the “Pool Commencement Date”), i.e., the date after which lenders must respond to this notification indicate whether they wish to participate in the test on a pro-rata basis. Based on the gross amounts due as of $325.26 if all lenders chose to remain in the test, your share would be 4.4211%.
The above share percentage is based on the 68 loans currently identified. Loans could be removed from the pool (due to cure payments, bankruptcies, etc.) prior to the Pool Commencement Date, in which case your percentage may be higher or lower.
The costs that will need to be recovered are: the purchase price that Prosper pays for the loan portions of lenders who do not want to continue with the test, court and service of process costs and the attorney firm’s contingency fee (which is 24%).
If you choose to accept your pro-rata share of the net recoveries of the legal test pool, net recoveries (if any) will be credited to your account monthly, for as long as there are loans remaining in legal collection. Due to the unpredictability of litigation, we do not know how long the test will take before legal collection efforts and activities are concluded on all loans in the test; however, we estimate that the test could continue for up to 18 to 24 months.
Since this is a test, we have not yet designed the system to track these revenues within the normal statement process. As such, the loans will be defaulted at zero value and the accounting provided on a monthly basis in a supplementary statement.
Please reply to this email by placing an “X” in the box below that signifies your choice on or before Tuesday 01/22/08. If we do not receive your reply by that date, we will assume that you do NOT wish to participate in this test. As such, we will transfer $33.11 into your account.
If you choose to participate in the test, we will send you a statement confirming your pro-rata share once the responses are tallied and final loan composition is set.
IF YOU CHOOSE TO ACCEPT YOUR PRO-RATA SHARE OF THE NET RECOVERIES OF THE LEGAL TEST POOL, THERE IS NO GUARANTEE THAT YOU WILL RECEIVE AN AMOUNT EQUAL TO OR GREATER THAN THE DEBT SALE AMOUNT, AND THERE IS NO GUARANTEE THAT YOU WILL RECEIVE ANY AMOUNT AT ALL. This is because legal costs and fees are deducted from recoveries before amounts are distributed to lenders, and therefore if costs and fees exceed recoveries, there will be nothing left to distribute to the lenders. If costs and fees exceed recoveries, you will not, however, have to make any out-of-pocket payments to make up the difference.
This test is designed to determine whether the viable threat of legal consequences will improve the repayment statistics for Prosper loans. This test is an important step in creating that awareness of consequences. Please consider your choice carefully.
Prosper Marketplace, Inc.
Please reply to this email by placing an X in one of the following:
[ ] I do NOT wish to participate in this test. In exchange for a purchase price of $33.11, I assign all promissory notes currently held by me associated with the loans listed in Exhibit 1 to Prosper Marketplace, Inc.
[ ] I wish to participate in this test. In exchange for a pro-rata share of at least 4.4211% of the future net recoveries of this test, I assign all promissory notes currently held by me associated with the loans listed in Exhibit 1 to Prosper Marketplace, Inc.
You must reply to this email by on or before Tuesday 01/22/08. If we do not receive your reply by that date, we will assume that you do NOT wish to participate in this test. Thank you.
Exhibit One: Loans Currently In Legal Test Pool
LoanIDLoanID
LoanID
LoanId
848
3918
6127
7739
950
3992
6302
7779
1840
4001
6311
8068
1850
4371
6383
8167
1906
4389
6759
8204
1975
4539
6809
9392
1984
4620
6880
9471
2297
4720
7008
9544
2407
4764
7186
12474
2576
4875
7250
12577
2627
5092
7270
12748
2854
5350
7348
12876
2982
5370
7385
13632
3059
5420
7458
13650
3069
5555
7501
14577
3584
5923
7627
14865
3897
6069
7673
16136
Thank you,
Prosper Operations
- Militaria Date Unknown Militaria Collectibles
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- Pro V1 Titleist New Golf Balls Golf
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- Unspecified, Unknown Date Calendars Paper Collectibles
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13 comments ↓
This is indeed most interesting. First, Prosper is getting aggressive on collections and actually doing something. Second, they’re PROACTIVELY contacting their lenders about it. Color me stunned.
[...] want to subscribe to my RSS feed or via email. Thanks for visiting!There was a math error in the original letter. My correct maximum portion of the loan pool is 0.044211% not the previously stated [...]
It is highly likely that the default rate is so high (er, sorry — the late rate) because borrowers have no fear of Prosper. I think Prosper may have not initially wanted to sue to try to ignore the issue for publicity reasons and because they have little to gain directly from the recovery of the loan. However, with nearly 20% of loans running late across credit grades after several months time, they had to do something.
By the way, click on the play list on the video (second button from the right) at Stomper Blog Going Natural http://www.stompernet.net/gn2/ Select the second video from the top (you have to scroll up) about Duplicate Content. These guys say off-site duplicate content does not matter. On-site duplicate content is what they say kills a website. To Google, this page and the update page are likely to look identical.
By the way, I have been wondering why you have the “You Comment, I follow” logo on your web page. Your site uses the nofollow attribute in comments.
The trackbacks are nofollowed, but any comment older than 3 days is supposed to remove the no follow. (that is to gives me time to review the links in case they make it past spam karma and point to a bad neighborhood.
I altered the 2nd post after watching the video. Thanks!
Those guys do an awesome job explaining search engine stuff, but they do an even better job of selling their best stuff to people who are interested in it. I heard stompernet made 60 million in one year by charging subscriptions. Although, they did spend some bucks hiring good people to drive great research for their members.
Thanks for answering the question. I did not notice the nofollows were removed after time. That is an interesting idea to deal with the spam. Personally, I turned on moderation because I don’t want any links to unmentionable things to appear on my site ever, but there are days that someone may post a comment and it takes me 10 hours to approve it which I know hurts the discussion. Of my regular commenters, I think that you are the only one who now requires approval and I can’t figure out how to get you past akismet automatically.
By the way, I just watched your video a few posts back. That was a good presentation by all th participants. It was really funny when you showed the borrower picture and your wife’s comments.
“Don’t Sue Me Bro!”
[...] it was revealed that Prosper is Going To Sue Deadbeat Borrowers and that lenders on the loans would be given a choice between taking a guaranteed upfront buyout [...]
Go away on vacation for 10 days and things change.
Hmm, this would be a big temptation. As I posted a couple times in the old forums when this came up, I would take the money now, because the length and cost of lawsuits are potentially too big, but I would want to see how it turned out.
Go You!, for being the canary on the coal mine.
[...] This month had a major event that I think will make it hard for the various ROI sites to even track accruately anymore… The “New Agency Test” aka Prosper is suing borrowers. [...]
[...] values for these figures range from (2.11%) to 13.06%. In addition, I have 6 loans in the new agency test. I have very little hope of someone without access to my account transaction history being able to [...]
[...] New Agency Test aka Legal Test has been updated via the blog: Legal Test Update We have obtained service on 12 of the suits – and [...]
[...] bold part caught my attention as I am on the loans that are part of the legal test. Related or just coincidental use of the root legal? More info [...]
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