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[kenL]

Maybe I'm making this up, but aren't 1.0/2.0 borrowers, with good histories (or at least lack of bad ones), grandfathered into 3.0? So, there could still technically be sub-prime borrowers out there and active.

I think they lower the minimum FICO score to 600 for previous borrowers with good histories.

[Cushie]

Maybe I'm making this up, but aren't 1.0/2.0 borrowers, with good histories (or at least lack of bad ones), grandfathered into 3.0? So, there could still technically be sub-prime borrowers out there and active.

I think they lower the minimum FICO score to 600 for previous borrowers with good histories.

I believe that to be true.  I was an HR borrower twice before (and no, nothing was verified beyond my address).  I think if I were still an HR I could borrow again.

[wftrust]

Hmm.  Making public statements that are at odds with their own official documents.  Not most excellent behavior, is it?

From the Prospectus:

For all borrower loans, Prosper verifies the borrower member’s identity against data from consumer reporting agencies and other identity and anti-fraud verification databases. Borrower listings are posted without our obtaining any documentation of the borrower’s ability to afford the loan. In limited instances, we verify the income, employment, occupation or other information provided by Prosper borrower members in listings. This verification is normally done after the listing has been created and bidding is substantially complete, but before the loan is funded, and therefore the results of our verification are not reflected in the borrower listings.

...

Listings are selected for verification based on the requested loan amount, the borrower’s Prosper Rating, Debt-to-Income ratio and stated income. For the period from July 14, 2009 through December 31, 2009, 39% of listings that had bids totaling 70% or more of the requested loan amount (1,099 out of 2,802) were selected for income and employment verification. Of this population, 182 (11%) failed to respond or provided unsatisfactory information in response to the request. This verification is normally done after the listing has been created and bidding is substantially completed, but before the loan is funded, and therefore the results of our verification are not reflected in the borrower listings.

In the same period, about 2,000 loans were originated. Assuming that all 917 successful verifications became loans, roughly 45% of the funded loans would have gone through income and employment verification. I agree that, based on the stats in the Prospectus, Prosper may have overstated its case here.

Please also be aware it is sort of misleading to say that Prosper verifies “all” the information that the borrower puts forth. First, Prosper only verifies after the borrower has been funded (lenders have obligated themselves), and uses only certain minimal pieces of info that can be easily manufactured by the borrower.

However, the borrower was funded (by the lenders) not only on the income statements the borrower made and the credit scores, but also on what they say within the text sections of the loan “application”. The lender truly has only that to go on to fund these loans and no verification is done on that information.

So for Prosper to say they verify these loans prior to being made is disingenuous. There have also been many loans made that even state within the “word” sections that the borrower is asking on behalf of another. How is verification done for them?

All this on top of there still appearing to be little teeth in the other end of the process, collections. Verification without strong collections is just fooling yourself as well.

[Mtnchick]

All this on top of there still appearing to be little teeth in the other end of the process, collections. Verification without strong collections is just fooling yourself as well.

In addition they don't seem to have reported to any credit bureau in almost a year.

[cellardoor]

While I've been (very silently) disenchanted with the direction of Prosper policies/business decisions/spin attempts for a long while now, I'm not sure that the NYT article on Raj Date is as much of a smoking gun as I thought upon first read. In the interests of full disclosure, my political leanings are generally cynical but fairly liberal, though my involvement w/finance has some impact on my hidden biases. I also had never heard of Raj Date before today.

From a fairly mainstream liberal website/blog:
http://blogs.alternet.org/speakeasy/2010/10/27/raj-date-is-the-best-thing-to-happen-to-consumers-since-elizabeth-warren/

brief excerpt, without live links:
Date did all of this work for free through the Cambridge Winter Center for Financial Institutions Policy, a pro-reform think-tank that he founded. In fact, Date himself funded many of Cambridge Winter’s operations. The think-tank took on everything, and was universally critical of the Wall Street establishment and regulatory infrastructure that had driven the economy off a cliff. Even better, it proposed concrete solutions to complex problems, and provided detailed, technical financial research to back it all up.

The Times story doesn’t even bother to link to the Cambridge Winter site, so I’ll do them several better. Here’s an article Date wrote criticizing excessive Wall Street pay. Here’s a report he wrote (.pdf) about how to regulate the shadow banking system (note that the report was co-written by Mike Konczal, a major reform advocate and widely respected economics blogger). Here’s a report (.pdf) Date penned slamming abusive auto lending. And here’s Date’s June 2009 essay praising the proposal to create the CFPB, at a time when such praise was profoundly unpopular on Wall Street. I could go on forever. They’re all available for free on the site. A reporter for The New York Times ought to be able to figure out how to do this stuff.

[onthefence]

LOL.  Prosper is retorting with a blog posting on newdeal20.org.  There is a website you can trust.

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”.

http://www.newdeal20.org/2010/10/27/a-failed-dirt-finding-expedition-on-the-cfpb-24982/

[Urbi_et_Orbi]

http://www.observer.com/2010/wall-street/long-awaited-elizabeth-warren-takedown

 

[onthefence]

http://www.observer.com/2010/wall-street/long-awaited-elizabeth-warren-takedown

Gee... with all of those debtor advocates, I don't see how on earth all those lenders lost a shit load above & beyond what was predicted by the Experian Plus credit grades.

[Urbi_et_Orbi]

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.

Personally I would have addressed the conflict of interest issues first. Then the "they called us a bad name" points. Actually I wouldn't have written a rebuttal at all. Let Dates write it if he feels the need.

I see what you mean, but I'm not sure what Prosper could have said on that - any conflict of interest questions have to be determined by Treasury, the CFPB, Date, etc. And the article's approach was basically to slam Prosper in order to make a "guilt by association" claim about Date. Why else start the story by saying...

A senior adviser to Elizabeth Warren, hired to help start the Consumer Financial Protection Bureau, is an investor in and, until recently, served as a director of a company that helps to arrange low-documentation loans for consumers with often-spotty credit histories.

(emphasis mine)

To have those claims in the first paragraph of an NYT article - that seems worth refuting if it's possible, no?

qfp

[nonattender]

Dude.

The NYT piece was about shaking the tree at CFPB, wrt secrecy.  There are hugely entrenched interests
who want to know, immediately, who's going to be regulating consumer financial services, in the future...

The uncertainty created by CFPB not disclosing most of their new hires, as they try to ramp up (which, I
think, is maybe a good idea, since it would only increase the opportunity for that agency to be co-opted)
scared someone, or some someones, who then reached out to a hack willing to write a hit piece for them.

Prosper was merely the very thin buckshot employed by a hired gun, who took the best shot he could, at
one of the CFPB's disclosed hires, hoping to flush out more information.  The story was not about Prosper.

More hilariously, it wasn't even a "story".  It was more of a "disappointingly ominous preface", lacking any
sense of form, which anyone who actually took the time to realize they were being "stirred up" would see.

Give it an honest re-read and instead of Prosper, insert, let's say, "Zopa" - is that story not just garbage?

I remember reading the piece that day and doing a serious eye-roll when I flipped past the page break, to
see the writer's buried admission that no conflict existed, despite the yellow journalism, on the front page.

It reminded me of certain posters here - though, no one here is getting paid to be silly --- OR ARE THEY?!

*Dum, dum, duh!*  (cut to commercial)

Carry on with the mishigas, if you wish.  I enjoyed your piece on Prosper's 10-Q, and how using WebBank
as the originator for P2P loans is a "conspiracy" because it's a... (hold your breath)... bank.  Both Prosper
and LendingClub use WebBank to originate any P2P loans.  Is it a conspiracy - or do they simply have to?

Think about it for a second.  If any of the P2P companies could NOT PAY SOMEONE ELSE to originate the
loans for them, do you think they might - and I'm just speculating here - originate their own loans freely?

Dude - where've you been?

-t

[Urbi_et_Orbi]

If you had read the thread, you would have noticed that it's about Prosper angrily defending themselves against "outrageous accusations" - which are actually fair and factual descriptions of their own platform - in a piece which, as you mention, is not really about them.

Even Prosper's employee here on this thread seems to agree that Prosper over-played their hand in their amateurish response.

I guess I wouldn't expect you to give this thread a fair read.  You appear much too eager to look for a way to crowbar in the party-line response of referring to the New York Times item as "hacky" and a "hit-piece."

[ladeeda]

Even Prosper's employee here on this thread seems to agree that Prosper over-played their hand in their amateurish response.

Couple things here. One, I work for Prosper, yes, but I'm here in my own capacity, speaking my own opinions. Certainly they're going to be colored by my experiences, but that's true of everyone else at .org as well. Two, I don't "agree that Prosper over-played [its] hand in their amateurish response". I do agree with NA that the article was a hit-piece and that Prosper's response was reasoned and appropriate.

[ira01]

I don't "agree that Prosper over-played [its] hand in their amateurish response".

Hmmmm, I wonder where we might have gotten that idea?  Oh wait, I know -- FROM YOUR OWN POST:

I agree that, based on the stats in the Prospectus, Prosper may have overstated its case here.

You should fit in well at Prosper.  

[nonattender]

You appear much too eager to look for a way to crowbar in the party-line response of referring to the New York Times item as "hacky" and a "hit-piece."

I hope it wasn't my laziness at not responding to this for like a month that gave my eagerness away.

You're a PR guy in real life.  Sort of.  The only clever thing about the NYT piece, from a PR perspect,
is that it spun up a future threat to Big Banks - P2P - into a way to attack its current threat - CFPB.

Anyway, as you insinuate, the "party" is right that it's "hackery".  (Pardon, your PR slip is showing...)

-t