Obviously, neither Prosper, its employees nor the lobbyist community at large has anything substantive with which to respond to this article, other than hurling irrelevant insults. This, of course, is nothing new, but pretty much the same thing we've been observing for the last 4 years.
What about the bullet points is not "substantive", out of curiosity? They seem to address several issues raised about Prosper in the NYT article.
To add to Urbi’s post, I felt there should be some written documentation on why various people here think this response is misleading, ineffective and inaccurate on Prosper’s part.
Taking each point Prosper made:
The misstatements and misrepresentations include the following:
■Suggesting Prosper is a sub-prime lender: obviously refuted by the fact that our average bureau score of borrowers is over 700. In fact it was 715 in September.
Prosper does in fact have an overall average lower than 700 for all loans created. Using just a current month and saying "see we are good" doesn’t tell the whole story (to be fair neither did the NYT piece). So this is a misleading point. Prosper would have been better served to take the approach that this is a new platform and technology and it is taking time to work out the bugs in the system to make this the best for all parties. Improvements have been made since the last release, blah blah blah….■Suggesting Prosper arranges low-doc loans. The fact is that our underwriting and verification procedures are highly rigorous, and include extensive documentation of employment, income, and identity of the borrowers.
Again, unless things have changed dramatically with current loans (enough to offset all the previous loans made), the great majority of the outstanding loans are low doc loans. And even the Docs requested can be easily made/forged with any simple software in existence today. In the past Prosper made no bones about only doing a “sampling” of the loans originated. There is little to even prove these folks are who they say they are, no one even meets them face to face for gosh sake!
Sub-prime implies to me that these folks should be charged a much higher interest rate to account for the risk, which they sometimes are. So how is the NYT article misleading? They are sub-prime and for the most part existing loans are low doc loans. Why else would AA rated borrowers come to Prosper to borrow money at higher rates than they could get from a bank if they really are in the situation they say they are.■Suggesting that there is uncontrolled risk and high losses in Prosper’s loan portfolio. As clearly illustrated in our recent report on risk performance, losses on assets booked in the last 15 months are beating expectations and are 1/3 of the loss rate on loans booked in 2007 and 2008.
While I appreciate that the recent loans appear to be performing better than the previous loans in total. That has been mainly due to the limitations prosper has put into place of the quality of the borrower. That is good, but only goes part way to the truth. The previous experience has been that many loans start defaulting after the 1 ½ year mark. So to point to loans that are only just now reaching 15 months and saying “look what a great job we are doing” is wrong on Prospers part also. Since Prosper started they have had a huge overall default rate, the NYT article was correct in that assessment.
Prosper would be better served talking up the changes here not worrying about the “suggested” uncontrolled risk and high losses. And they could have also talked up the problems that the consumer loaning industry has had in general since the economic troubles began.■The reporter failed to note Prosper’s long advocacy of consumers and the fact that Prosper’s CEO Chris Larsen has been a champion of consumer privacy and protection for over 10 years.
I have not seen the evidence for this, not saying it is not true, it is just a baseless statement in a rebuttal. For Prosper to make the statement without cites is the same misleading type of statements that we have heard many times before. Prosper would have been better suited to respond with specific examples of Chris’s consumer advocate largess…■Suggesting Raj’s relationship with Prosper was “rarely reported” when in fact it was properly disclosed in all relevant SEC filings and on our website.
Shortly after the article appeared, another industry journalist observed the egregious slant of the article and refuted it with a blog posting entitled “A Failed Dirt-Finding Expedition On The CFPB”.
This has already been pointed out in other responses on why this is misleading.
