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[brianguy]

As of March 31, 2009, of the 29,000 borrower loans, 55.2% were current, 19.6% were paid in full, 1.0% were 15 to 30 days late, and 3.8% were more than 30 days late.  In addition, of these 29,000 loans:
 
   · 9,066 loans, or 31.3%, have been more than 15 days past due on at least one occasion;

 
   · 7,933 loans, or 27.4%, have been more than 30 days past due on at least one occasion;

 
   · 6,957 loans or 24.0% have been more than 60 days past due on at least one occasion; 

 
   · 5,840 loans or 20.1% had defaulted (a borrower loan is considered to have defaulted when it is more than 120 days past due or has been discharged in bankruptcy).

this is all one really needs to know.  I mean if someone threw me down and forced this in my face before investing on Prosper, I would have ran for the hills or put all my money in some laddered CDs or equivalent risk/return investment for 3 years.   unfortunately for most people, that wakeup call is the kind of thing it takes for them to sit up and really take notice of the ugly side of the borrower side of Prosper.  not to mention all the dismal Prosper company crap which one uncovers while digging just a bit deeper. 

worse, by reading useless powder puff articles based on Prosper PR release crap, newbie lenders are mistakenly led into the belief that they've done their proper due diligence and homework before investing. 

[ira01]

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.

Exactly -- How long was Chris Larsen still spouting that grossly misleading 2.7% default rate, even long after I and others had publicized exactly why it was so misleading? 

[brianguy]

the usual Prosper excuse when it comes to defaults... a misplaced decimal point.   no other explanation!

[The_Cat]

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.

Has anyone complained to the SEC yet? hint

[Urbi_et_Orbi]

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.

Has anyone complained to the SEC yet? hint

http://fred93blog.blogspot.com/2009/02/prospercom-sec-offer-of-settlement.html

http://www.nasaa.org/NASAA_Newsroom/Current_NASAA_Headlines/9906.cfm

[The_Cat]

Who at Prosper is registered? Is this a violation of law now that these loans are considered securities?

Is the advertisement/communication from Prosper misleading? Has anyone brought this to the SEC?

The wheels move slowly but they do move.

[Urbi_et_Orbi]

They slap the "prospectus" note on the actual loans - and then they like to re-tweet claims of 26% ROIs and dazzle 18 year old bloggers with pre-digested talking points - and line the pockets of politicians to get rid of that pesky SEC oversight.

I am not certain what they're doing in this regard is technically illegal, but it fits nicely in with the pattern of questionable ethics, IMHO.

You got to ask yourself if you have good alternatives to investing with Prosper...and the answer appears to be "yes."

[ira01]

They slap the "prospectus" note on the actual loans - and then they like to re-tweet claims of 26% ROIs and dazzle 18 year old bloggers with pre-digested talking points - and line the pockets of politicians to get rid of that pesky SEC oversight.

I am not certain what they're doing in this regard is technically illegal, but it fits nicely in with the pattern of questionable ethics, IMHO.

I'm not an expert, but I suspect this is NOT legal.  You sure don't see Vanguard, Fidelity, or other such companies pulling the crap Prosper pulls.  I doubt that simply referring to the prospectus gives Prosper license to make false or misleading claims in other communications.

[Urbi_et_Orbi]

I think I will leave the actual accusations of overtly criminal behavior for others to make.

As for the smell-test, Prosper hasn't passed that one for a long time.

[NewHorizon]

...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

I just HAFTA quote these parts of that article...

But read carefully and you see that Prosper is not saying that Gimein got facts wrong, only that by citing those facts he left the reader with a more negative spin than Prosper would like.

Gimein’s piece ends with what I consider to be the most interesting facet of all this, that despite the relatively easy availability of quantitative evidence that the Prosper model is, at best, questionable, the media continues to happily shill for it as the next great thing.

Are more demands from Prosper for retractions in the offing?

[xraider]

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. 

That's not the part I have trouble with.  I have a problem with what Prosper did after it was confronted with the huge number of defaults and outright fraud.  Prosper changed the TOS to prevent lenders from discovering and reporting fraud, changed the TOS to prevent lenders from contacting the collection agencies, and changed the TOS so it no longer had to sell defaults to junk debt buyers.  In other words, Prosper's answer to its problems was, "let's scrap this round of lenders and go on to the next."

Now, Prosper warns in its SEC filings that fraud is a risk and Prosper doesn't need to investigate it.  So, future lenders are warned, whether they bother to read the SEC filings or not.

[Tokyo Joe]

In other words, Prosper's answer to its problems was, "let's scrap this round of lenders and go on to the next."

That's it in the nutshell.  It felt that way at the time, too.

[The_Cat]

They slap the "prospectus" note on the actual loans - and then they like to re-tweet claims of 26% ROIs and dazzle 18 year old bloggers with pre-digested talking points - and line the pockets of politicians to get rid of that pesky SEC oversight.

I am not certain what they're doing in this regard is technically illegal, but it fits nicely in with the pattern of questionable ethics, IMHO.

I'm not an expert, but I suspect this is NOT legal.  You sure don't see Vanguard, Fidelity, or other such companies pulling the crap Prosper pulls.  I doubt that simply referring to the prospectus gives Prosper license to make false or misleading claims in other communications.

The SEC used to get really bent out of shape when fund company advertisements included return information and a referral to the prospectus. You'll notice you rarely if ever here about returns in MF ads now. This was on historical return data. If Prosper is throwing around returns of over 20% which the data cannot and did not ever support.....

[Urbi_et_Orbi]

http://www.americanbanker.com/bankthink/peer_to_peer_lending-1006303-1.html

Org gets a tip of the hat here:  http://www.transcapitalist.com/transcapitalist/2010/1/21/continued-criticisms-of-p2p-lending.html

[ira01]

Org gets a tip of the hat here:  http://www.transcapitalist.com/transcapitalist/2010/1/21/continued-criticisms-of-p2p-lending.html

This comment was pretty dumb, though:

Investors are still reeling from those mistakes (see Fred93 who dumped $800K into the site and is really feeling the pain).

10 seconds of research on Eric's would have shown him that Fred93 has a respectable (hell, good by Prosper standards) ROI of 3.36%.