zcommodore

Once again, lenders on Prospers.org have come up with another complaint against Prosper; this time in regards to a possible ID theft.  You can read about it here in the lobby if you're interested.

One of the pervasive notions on .org is that the only time Prosper really honors it's guarantee is when the lenders cause a big ruckous in the forums.  They usually cite the storm raised by Leporello over one particular loan, or the Victoria Crawford case where one borrower managed to steal the identities of a number of coworkers and obtained loans through Prosper with them.  Looking at the facts, I think they portray a different story about Prosper.

If you look at the catalog of repurchased loans on the wiki hosted by this site, you will see there have been a total of 49 loans in the list of "typical repurchases" including one added only a week ago.  Separately listed are the 10 Victoria Crawford loans.  Notice that the "Leporello ID theft loan" is indicated in the list.  Of all 59 repurchased loans, I'm only aware of a huge discussion of those repurchases in two cases covering 11 loans.  This leaves 48 loans that have been repurchased by Prosper without hardly any mention of this fact by lenders until after the fact, if at all.

During Prosper Days 2008, a couple of Prosper employee's discussed what they are doing about collections and ID theft.  You can watch the video yourself but it is rather long and the part about ID theft is buried quite a ways in.  Fortunately, while it was happening live, a couple of attendees of the presentation posted about it live on IRC.  Here is the part about ID theft they mentioned:

<Gogmagog> Every loan goes through filters to check for theft, if there is a no-first payments
<beerbud1> collectionsw account disputes hey this account is not me
<Gogmagog> they investigate customer reported frauds
<Gogmagog> also pre-debt sale they have to investigate all of them
<Gogmagog> They can only have a valid ID theft claim, if they can contact the victim
<Gogmagog> The victim has to sign an affidavit that the loan isn't their
<beerbud1> statement of unauthorized loan request
<Gogmagog> They also have to file a police report and FTC report
<beerbud1> prsecution to the fukllest extent possible
<Gogmagog> because lots of people will sign things, but they won't file a police report :-)
<Gogmagog> PRosper will only rebuy if the Victim does all this stuff
<beerbud1> ing local and state authoritiesu
<beerbud1> state fbi and us postal service
<Gogmagog> because the victim is sometiems lying. :-)
<beerbud1> they say there all workiong together
<Gogmagog> 30 laons repurchased via guarantee

Basically, what this says is that Prosper has fairly high standards that have to be met before they will actually repurchase a loan.

• They have to contact the victim
• The victim must sign an affidavit that the loan isn't theirs
• The victim must file a police report
• The victim must file a FTC report

Given these high standards, I'm not surprised that there haven't been a lot of loans repurchased.  Also, I'm not sure that all the loans in the "typical repurchases" list met those standards.  Prosper seems to have a limited number of ways they can report the status of loans.  In the IRC chat log, it says only 30 loans have been repurchased due to the guarantee and the list has 49 (59 if you count the Victoria Crawford loans.)

At any rate, my point is that Prosper repurchases loans, not because of what is said in an anonymous forum, which is a good thing, but rather when certain standards have been met.  I don't know if their standard is really set too high or not but that is not my concern.  Really, there are a lot of other reasons loans are going bad on Prosper and the ID theft guarantee is not going to cover most of them.  I think there are a lot of less-than-honorable borrowers out there who know ways to game the system and that's the real problem Prosper faces and that lenders need to be aware of.