Fred93's blog

Grant Wanapat, Jerald Teixeira, Holly Brown, Valentino Raboteaux, Ricardo Barboza, Crystal Moffett, Shi Li Park, Louis Collet, Robert Riviera, Christopher Carr, Chinyere Woke, Carlos Delgado, Diana Davis, Victoria Crawford, Mario Villanueva, Brandi Fitzgerald, Josephine Sharaba, Jermaine Massey, Teresita Spreen, Karen Rozier, Coleen Alexadria Dacey, Krag Pappas, Teresa Calvert, Lovel Hoxie, Deniece Todd, Kimberly Jones, Vickie Brown, Michelle Wiese, Rory Manning, Jeremy Brom, Lynn Horton, Del Phillips, Mark Dionne, Chona Dionne, Oscar Monge, Gregory Kolesar, Roger Treskunoff, Lavina Lewis, S. White ***

Question: What do these people have in common? 

Answer: They have all been sued by Prosper.com, for not paying back their loans.

I have good news and bad news for lenders. 

The good news is that legal action is finally happening.  We've waited a long long time for this, and its good to finally see some serious action against deadbeats who have stiffed us.  Prosper's collection activity up to this point has consisted of phone calls, with the recently added modern technological innovation of a letter asking deadbeats to repay. 

The bad news is that the legal test project is very small, and is moving at a snail's pace.  Lets review the schedule, so you can see what I mean.

01/15/08 -- Prosper sent many lenders an email message asking them to "opt in" to this project to allow Prosper to sue borrowers on the lenders behalf.  I opted in.

02/17/08 -- Prosper repurchased the loans from lenders, to simplify court proceedings.  Prosper didn't pay anything to the folks who opted in.  Payment will come later, depending on success in the lawsuits.

02/25/08 -- First suit filed.  In Riverside county.  Prosper vs Cline
02/26/08 -- Second suit filed.  In Orange County.  Prosper vs Rozier

Its now 05/06/08 and neither of those two cases has yet had proof of service filed with the court.  You can't get very far until you tell the court that you have served the complaint to the defendant! 

A great many more cases were filed 04/01/08, and a few more later in April.

So after starting the project on 01/15/08, four months later we only have proof of service for one defendant.  That's movin' kinda slow.  How many months must we wait to serve the other 65 defendants? 

If the very first step takes four months, imagine how long the other steps are gonna take!  In what year might we have verdicts?   We have to move more aggressively than this.

Second problem is that Prosper is only suing 66 nonpaying borrowers in this project.  They think of it as a test.  If it goes well, maybe they'll do more someday.  Today there are 1187 more Prosper loans that are more than 4 months past due (not counting the 66 in this test).  These loans are on a fast track to nowheresville.  If Prosper follows its standard procedure, these 1187 loans will be auctioned off for pennies on the dollar.  This could happen to the majority of them within days. 

Pennies on the dollar ain't good.  In a recent note from Doug Fuller to lenders, he told us that the bids he received on the current set of 4+ late loans was about 1/3 the price they've received in earlier auctions.  That means $0.03 or $0.04 on the dollar I think.  This $0.03 or so is what lenders are going to get for most  bad Prosper loans for the foresable future, because the legal test program is tiny tiny tiny, and slow slow slow. 

Doing a "test" for a year or so on a small number of loans sounds prudent if its not your money that was lent and is now being washed down the drain.  If it is your money, you have a different view.  Prosper has simply never taken collections seriously.  The lawers need to put some of these cases in high gear.  Get them served for heaven sake!  Learn what we need to learn in a few cases, and then greatly expand the program.  This must be done, because the status quo sucks.

You can't be a successful loan company if you don't try real hard to get borrowers to pay the money back.  "Try real hard" doesn't mean "phone calls and one letter".  Most of Prosper's management effort is focused on making a better website, or "Are we a Web 2.0 company?"  (the title of a real session at Prosper Days '08 ... I kid you not).  Get real.  You're a loan company.  Your success depends on the value of your product.

*** This is not a complete set of names of folks being sued by Prosper.  I obtained these names by looking up the suits in public court records in the large counties of California.  You may obtain this information, and also status of each case from the county court websites.   .