Did they defer or forgive the payment of principal or interest? No they did not
I think you are wrong. To me, Prosper clearly deferred the payment of principal and interest, by making a subsequent arrangement with the borrower (i.e., a "modification") that the borrower could permissibly make partial payments later than the original due dates. By giving the borrower permission to make these late partial payments, Prosper has deferred the payments, in violation of the LRA. And this conclusion is bolstered by Prospers continued reporting of the loans as "current." In my humble opinion as a California lawyer, you are being too clever by half.
Perhaps I am too clever by half; jury is still out on that one, maybe it is only a quarter...
But none-the-less Prosper did not modify, there is no change to the Borrowers Agreement, nor the LRA. I doubt very seriously if there is actually any written agreement to anything, probably all verbal. But even if there were, Prosper did not give
permission to make partial payments, they
encouraged the borrower to pay anything they could. The best that could be said here is Prosper decided the amount that the borrower paid was enough to induce Prosper, in our behalf, to not report to credit agencies and not turn the borrower over to collections (at a possible detriment to our interests). Can’t wait to hear the lawsuit you might bring there, “But your honor Prosper was collecting money so why did they turn it over to collections so I lost 17% when I didn’t have to?!”.
Under your strained interpretation, Prosper could choose, for any reason, to allow any or all borrowers to convert their loans to 3-year balloon loans by telling the borrowers they need not make ANY payments until the final 3-year due date so long as they pay the modest late fees with the final balloon payment.
Not strained at all, Prosper is constrained by the no payment in a 30 day period. If there is “no” Payment they are required by the LRA to eventually turn it over (they may not, so then we have a case, but not before).
Indeed, under your interpretation, Prosper could even choose to tell borrowers that they are free to make their final payments in 20 years, rather than three, so long as interest and late fees still accrue -- after all, according to you, since the payments would still technically be "due" sooner (with no penalty other than interest and late fees for not paying when due), that wouldn't count as a "modification" or a "deferral" or a "change in final maturity date" either.
Once again not at all, the 30 and 120 day clauses are critical here. The borrower must pay something. Now it is then up to our agent (Prosper) to decide if that was enough to avoid Prosper sending the loan off to collections (and out of their and the lenders control) or not.
And the note has a fixed end date, Prosper has not modified that nor can they. It is just a balloon payment due then if the borrower has not caught up sooner. Now of course if the borrower does not pay up at that date what is the out, and what is the requirement? Turn over to collections or a continue collecting money from the borrower beyond the date? Prosper will obviously make that call as our loan administrator, per our agreement with them, when the time comes.
Moreover, you forget that the LRA incorporates the terms of the Promissory Note, which includes the following: "This Note is payable in 36 monthly installments of $___________ each, consisting of principal and interest, commencing on the ________ day of _____________, and continuing until the final payment date of __________________, which is the maturity date of this Note." That clearly states that the Note must be paid in "36 monthly installments of [the fully amortizing monthly payment]." Prosper is permitting the borrowers to breach that provision, and thereby breaching the LRA.
No they are not
permitting it. You keep laboring under the assumption that Prosper has any say in what the borrower will do. You are also assuming for some reason that Prosper is committed to, at exactly “30” days, turning the loan over to collections.
“When a payment becomes 30 days past due Prosper will turn it over to collections” is the statement. So if they turn it over at 31 days are they in violation? How about at 32? Or 119? Is that calendar days or working days or what? They did not commit in the LRA to a specific number (you interpreted it maybe?). So once again we have no leg to stand on, what is reasonable for them to do as our Administrator is the overriding concern there.
All Prosper has the power, and eventual obligation, to do is turn this over for collections (nothing about the CRA there at all). They also appear to have an obligation to try to collect prior to doing so, but that also is not clear in the LRA. They do however have a stated fiduciary duty to protect our interests as the administrator of the loans.
Contracts have to be interpreted in the light of the parties' understanding at the time of contracting. I don't think anyone believes that either Prosper or the lenders would have interpreted the LRA in the strained way you now suggest. And I bet that if one searched the archives of Prosper.com and its forum, one would find statements by Prosper specifically disclaiming the right to do what it is now doing. In short -- I call bullshit.
Guess that would be up to a court to decide how it was interpreted on each side. I know how I read it, and you know how you did, they obviously differ.
Also do not forget you signed this
“This agreement, along with the Prosper Terms and Conditions, represent the entire agreement between you and Prosper regarding your participation as a lender on the Prosper credit marketplace, and supersede all prior or contemporaneous communications, promises and proposals, whether oral, written or electronic, between us with respect to your involvement as a lender with Prosper.” .
So cry and whine all you want about other promises/statements made elsewhere, but this will override. Now I do not know what they might have said since the date of your last signing the LRA, but I have received no direct notification from them regarding those changes. So perhaps you have a leg to stand on for those statements.
In fact there is actually a clause in this section that would indicate that you have actually already agreed to let them do what they have done: “Prosper shall have full power and authority to do or cause to be done any and all things that it may reasonably deem necessary or desirable in connection with such servicing and administration of the Notes on your behalf, and you agree to cooperate with Prosper in the performance of its servicing and other obligations under this agreement.”
Except that Prosper cannot do what it expressly agreed not to do, which, as I explained above, includes what it is now doing.
Believe I addressed this above as well. Sounds like we interpret it differently, and if we do, can Prosper?
The part titled "Reporting” in Section 5 is perhaps most germane to our conversation. It states; “Prosper will report loan payments and delinquencies to credit reporting agencies with Prosper listed as the servicer, and without displaying your identity as the owner of the Note.” Where in this section is there a timeframe listed that the reporting must be done in? I think the intent of this section could be interpreted to be that Prosper is protecting your identity, not that they are obligated/required to report to a credit agency. But that could be construed as grey, and since there is no timeframe required Prosper can delay their reporting as long as they like without your approval.
Wrong again. The "timeframe" for reporting would be filled in from Prosper's many other statements (in its help files, FAQs, forum posts, etc.) specifically stating that late loans are reported to the CRAs once they become 30 days late.
Prosper never agreed to
not try to collect any funds from the borrower when they became past due. And once they have collected partial funds they never agreed (in the LRA nor borrowers statement) to
absolutely 100% (or even partially) report anything to Credit Agencies in our behalf. I will grant you that you might have a case to go against Prosper for other places that they wrote about turning borrowers over to reporting agencies, but I think that will be flimsy as best. They will argue that they had to say that (even if it was a toothless statement) publically to try to keep borrowers on their toes and paying.
Section 6 Collections of delinquent loans.
Part c. deals with turning this loan over to collections at 30 days when a payment becomes past due 30 days. Now this is the main grey area for me, is a partial payment a payment that is past due or not?
Of course it is -- this isn't even debatable. A payment is "past due" when the full monthly payment is not received by the due date (the day of the month the loan originated). That is the clear understanding of everyone involved, including of Prosper for years. Under your ridiculous interpretation, a borrower could pay 1 penny and claim that their payment isn't "past-due." Why don't you try that with one of your credit cards and see how far it gets you.
Sorry looks like I have to ‘splain myself better. Yes of course the note is “past due”.
The borrower’s loan agreement and our LRA would seem to indicate that only the part not paid is past due, but the part paid was paid on time. Note the way I am saying this: that if the borrower makes a partial payment, then only the part not made is past due (not a [Whole] “Payment” so the 30 days may not trigger, and as I said this is the part that is grey to me).
But even if it did, Prosper would have many more days than that to actually turn it over to collections. Only past due charges (one time only) and interest would continue to apply until that payment is brought current. But it does not then automatically trigger a turning over to collections
at that point in time, if in Prospers judgment as our loan administrator the loan has a chance of becoming fully current again.
Now as far as the extreme example of .01 you used, neither the borrower nor Prosper is claiming that the borrower is not past due. Both parties are only appearing to agree that an acceptable enough portion is past due, such that Prosper will not take additional credit reporting action (that is not mandated anywhere anyway) nor further collection actions (which is also not mandated within a certain timeframe). I would think that if Prosper tried to make an agreement to claim .01 was in the lenders and the borrowers’ best interest, there would be issues. Some reasonable number (prudent man perhaps) would have to rule there, you would know better than me on what payment level a reasonable person should accept on an unsecured loan. But I do not think .01 is it, nor do I think Prosper does.
In your example if the person does not pay any late charges on their account as an additional current payment beyond the mandated one, but instead just makes their normal monthly payments then they are also in default and should be turned over to collections. But the loan doc’s specifically allow that to occur (so by default you are getting a partial payment the minute the late payment is applied and not paid for) and are adjusted at the final due date.
Prosper has obviously interpreted that to mean that it is not past due and so is not being turned over to collections.
Prosper has no authority to "interpret" the agreement in this patently absurd way. Moreover, under your interpretation, Prosper has violated the rights of every borrower in the past that Prosper reported to a CRA as late if that borrower made a partial payment (and there have been many). Should they all sue Prosper? Do you think they would win? Of course not.
Not at all, all agreements are always interpreted, no matter how much a lawyer thinks they have an iron-tight case, there are always varying interpretations. That is why there are so many court battles obviously, have to keep you employed somehow.
And your argument doesn’t hold water. Reporting to a CRA is Prospers option, neither ours nor the borrowers, as to how and when this option is applied. So yes Prosper can, should and does treat each loan individually and will not be in trouble with reporting to a CRA or not. Sue to have Prosper changed as our administrator, but they appear to be working within the written agreement to me on that.
Prosper acted within the letter of the LRA and the Lender Promissory Note in its “suggesting” that the borrower pay something to avoid a reporting to the credit agencies.
Prosper did no such thing.
I have not seen where any of you have pointed to an area of the LRA that Prosper has violated.
Then you haven't been paying attention.
Still respectfully disagree. I believe your anger towards Prosper might be clouding your judgment.
WFT
Author
Topic: Collections – Hardship Arrangement are Benefiting Lenders (Read 44548 times)