Fred93's blog

In one of my favorite scenes in The Wizard of Oz, the little dog Toto pulls back a curtain, exposing the fact that the great wizard of Oz is really just an ordinary old guy putting on a show.  This teaches kids to question authority, look behind the facade.  Good stuff.

Two weeks have gone by since Prosper fired Penncro, and there's no visible action.  Is anyone at all collecting on our loans?

On Jan 28, 2008, Prosper announced in email to (some) lenders that the collection agency Penncro wasn't doin' a good enough job.  Lenders have of course known this and discussed it openly for over a year, but it was good to hear Prosper finally say it.  Lenders were given until Feb 4, 2008 to state their objections.

Well, then a normal person would expect that on the next day, Feb 5th, these loans would be in the hands of the new agency Amsher, and their workers would be dilligently working on our late borrowers.  Not so.  Two weeks have now passed since Feb 4th, and Prosper's stats still show that no loans have transitioned to Amsher.

What gives?

You can see the data yourself at https://www.prosper.com/secure/account/lender/collection_agency_select.aspx

It shows that Prosper is still sending new loans to Penncro every day, and none to Amsher.

There are many possibilities.  One possiblity is that the loans have been moved to the new agency, and Prosper is simply reporting bad data to lenders.  If so, they should tell us they're feeding us bad data.  Another possibliity is that the loans have not been moved.  That would be bad, because Penncro knows they're fired, so I can't imagine they're doing any work on our stuff these days.

What gives?

Time is money. 

As I explained last time, Prosper said it would move our late loans from the poor-performing Penncro agency to Amsher.  Yet, there seems to be no action.  Here's an update on what has happened since I last wrote about this.

02/13/08 - no action.  The Amsher numbers are still all zero.

02/14/08 - no action.  The Amsher numbers are still all zero.

02/15/08 - no action.  The Amsher numbers are still all zero.

Lenders can view the agency numbers at https://www.prosper.com/secure/account/lender/collection_agency_select.aspx

Lenders have no idea where our loans are now, or whether collections activity is ongoing.  Is Penncro still making phone calls and taking other collections actions after they were "fired" by Prosper?  Is anyone working our late loans?

Just about a year after I began speaking up about how poor the Prosper collections agents handled late loans, Prosper announced that they were taking action. 

Prosper recently (Jan 28 2008) sent a letter to many (but not all) lenders, explaining that the Penncro agency was essentially being fired for poor performance.  Well hot damn ... Its about time.  A year late is better than nothing at all.

The letter from Prosper announced that a new agency AmSher would take over existing loans unless lenders objected.  I doubt that many lenders objected!

If you wish your existing Notes to remain at PennCro, please send an email to collectionstesting@prosper.com with subject of “Retain PennCro” by Monday, February 4, 2008, otherwise all your existing Notes designated for service by PennCro will be automatically transferred to AmSher and no further action is required. 

Ok, so February 4th passed, and then another week has gone by, and according to Prosper's collection agency web page no loans have been moved to AmSher.  Why the hell not?

Time is money.  Our money is tied up in loans that are rotting, being incompetently serviced by at Penncro.  Prosper apparently agrees.  New guys have been chosen.  Did somebody forget to push the button?

To lenders who have been consistently insulted for the past year by Prosper's promises, inaction, and more recently complete refusal to discuss the subject or allow the subject to be discussed on their forums, this delay is just another insult.  One week may not sound like much, but one week delay followed by another one week delay is the way you get to where you are: Two years into the process with no competent collections operation.

Push the damn button already.

Here's the 02/01/08 update to my late loan statistics charts.

These charts show statistics for the performance of ALL prosper.com loans. Each curve represents the set of loans that were created in one calendar month. The vertical axis is the fraction of those loans that have "gone bad", in other words are 1 month late or worse (up to and including default). The horizontal axis is the observation date. All data comes from Prosper.com's performance web page.

A larger, more readable version of that chart can be found here

Nothing much new.  Loans continue to go bad at about 20% per year. 

Here's the 01/15/08 update to my late loan statistics charts.

These charts show statistics for the performance of ALL prosper.com loans.  Each curve represents the set of loans that were created in one calendar month.  The vertical axis is the fraction of those loans that have "gone bad", in other words are 1 month late or worse (up to and including default).  The horizontal axis is the observation date.  All data comes from Prosper.com's performance web page.

A larger, more readable version of that chart can be found here

If we slide the curves so that the horizontal axis represents days since origination month, all the curves fall on top of one another, and we can see how remarkably similar they are.  (I've left the oldest three months off of the "slid" chart, because those months do seem to be a bit different.)  It will be interesting to learn how much these curves "bend" as we go past 1 year loan age.  There is a hint in the data that the default rate may decrease as the loan ages, but it isn't yet clear.  I described a mathematical model and showed some curve fits which attempted to estimate how the default rate might be changing over time several months ago on the old Prosper.com forum.  I'll update that eventually and post it here as more data becomes available.

If you look out one year from origination (ie 360 days) you will see that about 20% of Prosper's loans have gone bad.  You can also see that this is remarkably consistent from month to month (ie the different curves).  One can only conclude that the default rate of Prosper loans is in the neighborhood of 20% per year.  Loans originating after Feb'07 are going bad at a slightly lower rate, probably because Prosper increased the minimum credit score required for a Prosper loan at that time.

Shamefully, Prosper continues to report much lower default rate numbers to the press.  See a recent example in the Chicago Tribune article of 01/13/07, which talks of a 4.7% default rate.  http://www.chicagotribune.com/business/yourmoney/chi-ym-started-0113jan13,1,842983.story?ctrack=1&cset=true