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[mothandrust]

I'm just curious if this is another class action where only the lawyers get paid and the lenders get an apology?

Do victims ever get an apology from a lawsuit?  I thought they typically end with money exchanging hands and the paying side not admitting any wrongdoing.

[havastat]

Do victims ever get an apology from a lawsuit?  I thought they typically end with money exchanging hands and the paying side not admitting any wrongdoing.

That's when they settle. Which will probably happen here. I suspect most investors would rather have money than an apology.

[lhsbandnurd]

+1

Prosper's apology wouldn't be worth the press release it was printed on.

[yankeefan]

I'm just curious if this is another class action where only the lawyers get paid and the lenders get an apology?

Do victims ever get an apology from a lawsuit?  I thought they typically end with money exchanging hands and the paying side not admitting any wrongdoing.

I believe msava was of the belief that an "apology" is about all most "victims" get from a class action settlement, after lawyer's fees.

[Investar]

So, I would assume that for Prosper and its ongoing viability, this is good news.  It does not have to use its money to defend the class action.  It probably won't have to use its funds do pay the class action (should it be successful) ... there are probably now deep pockets to pay should Prosper lose.

As I recall from reading the policy (it is/was exhibited in one of the early-on documents), the limits of coverage are $2 million per annum so the policy will at best, cover Prosper's side of litigation costs. Nothing for the lenders or their lawyers will come from here.

[xraider]

Unless it's a self-liquidating policy, which would surprise me, defense costs are in addition to the indemnity limits.  However, the indemnity coverage for this claim will be limited to $2,000,000, so settlement or judgment above that will be on Prosper's dime.

Hey!  Maybe that will incentivize them to get collections going.

[Investar]

Thanks for the clarification, Xraider and thanks in general for helping us 'pedestrians' comprehend.

[havastat]

One interesting wrinkle of the decision is that Prosper's basis for defense coverage is that the insurance excluded any securities issued by the insured. Prosper successfully argued that the exclusion didn't apply because it wasn't the "issuer" of the notes -- it argued the word "issuer" refers to the party who has the obligation to pay, and for Prosper 1.0 the only one obligated to pay is the borrower. The judge bought the argument.

This may shed a little bit of light on Prosper's filings when it attempted to collect claiming that it only functioned as a broker between lender and borrower.

Perhaps Prosper was trying to avoid saying anything that might put into one of the coverage exclusions and lose its opportunity to claim insurance coverage. It had to navigate a very narrow channel between some very strong exclusion language in the insurance policy.

[Faithful_Steward1]

It would certainly be fitting if Prosper's abysmal collections ended up being not on loans belonging to us lenders but on loans it would eventually have to rebuy from us. Ironically, if they had treated these loans like their own when implementing collections all along, most would probably still be lending on their site. At least until they decided we no longer owned loans.

[havastat]

I think there's no question that Prosper is the "issuer" of its securities after the SEC registration. The insurance coverage, and the lawsuit, only applies to the unregistered securities which were sold before that.