Print

[JammingJAY]

Man this is almost like a loanicide.

 

[Tokyo Joe]

...and it keeps spreading...actually the Reuters blog item appears to have quite a reach.

http://articles.moneycentral.msn.com/SmartSpending/blog/page.aspx?post=1567845&_blg=1,1528117

http://fuckfidelity.com/?p=112

http://www.wikio.com/technology/internet/uploading_and_downloading/peer-to-peer

Fuck Fidelity dot com?? 

[ira01]

Man this is almost like a loanicide.

That's what I was thinking too.     Time for Prosper to hire a PR firm to try to quench the fire before Prosper is fully consumed by it (although it may already be too late).

[God-Father]

ETA:  OTF beat me by 2 minutes on this. 

No prizes for second place!   

[xraider]

I loved that comment on techdirt: OK, Prosper, your refutation is that people didn't lose as much money as that article says?   HAHAHAHA.

For anyone who's undecided, read Prosper's SEC S-1 filing:

Information supplied by borrowers may be inaccurate or intentionally false. Information regarding income and employment is not verified in the majority of cases.
 
Borrower members supply a variety of unverified information regarding group membership, purpose of the loan, income, occupation, and employment status that is included in the borrower loan listings on our website.  We do not verify this information, and this information may be inaccurate or intentionally false.  In addition, we generally do not verify a borrower’s stated income, employment status or occupation, and the information borrowers supply may be inaccurate or intentionally false.  Prosper borrowers may misrepresent their intentions for the use of borrower loan proceeds.  Prosper and WebBank do not verify any statements by Prosper borrowers as to how loan proceeds are to be used and do not confirm after loan funding how loan proceeds were used.  All listings are posted on our platform without our verifying the information provided by the borrower member, including the borrower’s stated income, employment status or occupation that appears in the listing.  Lender members should not rely on borrower’s self-reported information such as income, employment status, or occupation in making investment decisions.  In the limited cases in which we have selected Prosper borrower members for income and employment verification, the verification is normally done after the listing has been created and bidding has ended but prior to the time the borrower loan is funded.  From the period from September 1, 2007 to August 31, 2008, when we have conducted pre-funding income and employment verification approximately 56% of these borrowers have provided us with satisfactory responses and received a borrower loan; approximately 38% of these borrowers either did not provide satisfactory responses or did not respond, and their listings were cancelled; and approximately 6% of these borrowers either withdrew their listing or failed to receive bids totaling the amount of their requested loan. Of listings that achieved at least 70% during this period, 22.6% (3,486 out of 15,436) were selected for income and employment verification.  These listings were selected based on a combination of factors including amount of loan requested, Prosper Rating, Debt-to-Income ratio and stated income.  The identity of borrowers is not revealed to lender members, and lender members have no ability to obtain or verify borrower information either before or after they purchase a Note.  Potential lender members may only communicate with Prosper borrower members through website postings on our platform and then only on an anonymous and unverified basis.  If you rely on false, misleading or unverified information supplied by borrowers in deciding to purchase Notes, you may lose part or all of the purchase price you pay for a Note.The borrower loans are not secured by any collateral or guaranteed or insured by any third party, and you must rely on Prosper or a third-party collection agency to pursue collection against any borrower.
 
Borrower loans are unsecured obligations of borrower members.  They are not secured by any collateral, and they are not guaranteed or insured by any third party or backed by any governmental authority in any way.  Prosper and its designated third-party collection agency will, therefore, be limited in their ability to collect on borrower loans.  Moreover, borrower loans are obligations of borrowers to Prosper as successor to WebBank, not obligations to the holders of Notes.  Holders of the Notes will have no recourse to the borrower members and no ability to pursue borrowers to collect payments under borrower loans.  Holders of the Notes may look only to Prosper for payment of the Notes.  Furthermore, if a borrower fails to make any payments on the borrower loan, the holder of the Notes corresponding to that borrower loan will not receive any payments on their Notes.  The holder of such Notes will not be able to pursue collection against the borrower and will not be able to obtain the identity of the borrower in order to contact the borrower about the defaulted borrower loan.  In addition, as described in this prospectus, in the unlikely event that we receive payments on the borrower loan relating to your Notes after the final maturity date, you will not receive payments on your Notes after maturity.  See “Summary of Material Agreements Indenture and Form of Notes.” for more information.

...

 
Some borrowers may use our platform to defraud lender members, which could adversely affect your ability to recoup your investment.
 
We use identity and fraud checks with external databases to authenticate each borrower member’s identity.  Although we use diligent efforts in this regard, there is a risk that our fraud checks could fail and fraud may occur.  In addition, borrower members may misrepresent their intentions regarding the purpose of the borrower loan or in other information contained in borrower listings, which we do not verify.  While we will repurchase Notes in limited circumstances, e.g., a material default on the corresponding borrower loan resulting from verifiable theft of a borrower’s identity, or resulting from the failure of the corresponding borrower loan to materially comply at origination with applicable federal and state law, we are not obligated to repurchase a Note from you if your investment is not realized in whole or in part due to fraud (other than verifiable identity theft) in connection with a borrower listing, or due to false or inaccurate statements or omissions of fact in a borrower’s listing, whether in credit data, a borrower member’s representations, user recommendations, group affiliations or similar indicia of borrower intent and ability to repay the borrower loan.  If Prosper repurchases a Note, only the outstanding principal balance will be returned to the lender member.  See “About the Platform—Prosper’s Note Repurchase and Indemnification Obligations” for more information.
 
The fact that Prosper will have the exclusive right and ability to investigate claims of identity theft in the origination of loans creates a significant conflict of interest between Prosper and the lender members.

Prosper has the exclusive right to investigate claims of identity theft and determine, in its sole discretion, whether verifiable identity theft has occurred. Verifiable identity theft triggers an obligation by Prosper to repurchase a loan.  As Prosper is the sole entity with the ability to investigate and determine verifiable identity theft, which triggers its repurchase obligation, a conflict of interest exists. Lender members will be relying solely on Prosper to investigate incidents which might require Prosper to repurchase a loan. The denial of a claim under Prosper’s identity theft guarantee would save Prosper from its repurchase obligation.


...


 

http://www.sec.gov/Archives/edgar/data/1416265/000141626509000033/prosper_s-1a6d7d13d2009.htm#risk_factors

Too bad these risk factors weren't clearly stated when I started lending -- particularly the last quoted risk factor, which is essentially what's been my experience of Prosper's attitude toward lenders: We have your money so now you're on your own!

[Cushie]

I find it interesting to see how quickly this article is spreading and how even people who normally would write the Prosper puff are seeing the real truth.  Prosper HQ has to be unravelling a little bit of a lot right now.

[Mark12547]

Prosper HQ has to be unravelling a little bit of a lot right now.

I sure hope so! I would gladly forfeit my current portfolio balance for a great celebration: the demise of Prosper Marketplace, Inc.! After seeing how they suspend those who report known fraudsters, how they fund listings of people who admit on their own forums that they intend to defraud lenders (when they used to have spreebb forums), and go full out suspending those who use links to prospers.org and wiping clean member pages that mention .org, and multiple examples of false advertising, I think it is time for them to enjoy some real justice.

May the class action lawsuit go well!

[Tokyo Joe]

I don't know how far this has "blown".  The few links aren't exactly big names.  But it is blowing up bigger than if Prosper had kept its dumb mouth shut for once.  Talk about foot in mouth disease...  Another article and another rebuttal would be immensely entertaining, I hope someone'll get cracking...

[112233]

Nice time for a followup article by Chuck Saletta.

[okie]

I honestly believe that Larsen was not prepared for the huge number of defaults and outright fraud when Prosper started in 2006. He was as optimistic as we were when we started to lend. I also believe the lack of preparation and optimism borders on criminal negligence. Unlike the majority of actual lenders, he was the professional businessman with lawyers and savvy experts on his payroll. I'll bet Bernie Madoff also tried to blame the "unexpected" economic downturn for his client's losses, until the investigation began and he was exposed as a greedy sociopath.

[GLeaderAccountantsChoice]

I also believe the lack of preparation and optimism borders on criminal negligence.

Selling unlicensed securities could result in criminal charges, if I'm not mistaken.  In Prosper's case, none were filed.

Prosper is a very scary idea when you consider all that could go wrong with $175,000,000 flying all across the internet with no regulations in place except for Prosper's ever-changing terms of service.

[brianguy]

I also believe the lack of preparation and optimism borders on criminal negligence.

Selling unlicensed securities could result in criminal charges, if I'm not mistaken.  In Prosper's case, none were filed.

Prosper is a very scary idea when you consider all that could go wrong with $175,000,000 flying all across the internet with no regulations in place except for Prosper's ever-changing terms of service.

hey, it's worked all these years for eBay...  oh, those were just some crappy beanie babies you say?   nevermind.

[onthefence]

I find it interesting to see how quickly this article is spreading and how even people who normally would write the Prosper puff are seeing the real truth.  Prosper HQ has to be unravelling a little bit of a lot right now.

This always happens when a real investigative reporter does his or her homework.  Other reporters see a good piece & hurl out an easy armchair replica.

There are very few true investigative reporters left in the US. :'(

[onthefence]

I honestly believe that Larsen was not prepared for the huge number of defaults and outright fraud when Prosper started in 2006. He was as optimistic as we were when we started to lend.

He was the founder of E-Loan, he knew it wasn't as good as the FICO estimates.  I'll give you he probably didn't know beforehand the extent of how bad it would get, but you know what.  I guarantee you he knew how bad it was at least by the time we knew.  And yet they still kept downplaying the risk & how easy it was to do and how everyone could get these incredibly high returns and how the default risk was so low.

Not only did he actively deceived new lenders, they worked their butts of to prevent us from warning people.  You know what?  Had they actually let us warn people, they might not have made such incredibly bad loans to begin with.

[Urbi_et_Orbi]

http://clickworldnews.com/2010/01/21/person-to-person-lending-not-saving-the-economy-actually-looking-really-really-bad/