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[xraider]

I suspect all defense lawyers are trained to use the words "defend vigorously" from their first day at law school.
Go ahead, Google "defend vigorously" or "vigorously defend."

LOL.  Actually, we use that precise language in audit letter responses (when auditors ask defense counsel to discuss pending litigation) so it is something canned.

[mothandrust]

I suspect all defense lawyers are trained to use the words "defend vigorously" from their first day at law school.  Go ahead, Google "defend vigorously" or "vigorously defend."

I'm sure they are, that's their job. 

It is a decision of management to consider that unhappy customers have some legitimate points (e.g. the SEC ruling) and work to resolve those amicably and professionally, or to spend time and money hiring lawyers to vigorously defend the indefensible.

Where was that vim and vigor when lenders were begging for better pre-loan verification and collections?

[mtrauch]

mtrauch, I am also interested in the basis for your conclusion that the class action is a joke with minimal potential damages.

You do understand that Prosper entered into a number of consent decrees with a number of states admitting that they were improperly selling securities without registering them and without adequately disclosing the risks?  You also understand that Prosper now files updated SEC documents with information and disclosures ON EACH INDIVIDUAL LOAN?  In other words, it has completely changed its business model and disclosures as a further admission (along with the consent decree) that it was doing business improperly in the past.

According to the minutes of the May 2 hearing, the court believes that the action may be appropriate for summary judgment or summary adjudication.  Given the consent decrees, I have a pretty high degree of confidence as to which way the court would rule.

So, if you think the class action is a joke, you must be on Prosper's payroll.

+1.  And we both forgot to mention that the SEC -- the agency tasked with enforcing the federal securities laws -- already determined that Prosper broke the law and issued a cease and desist letter. 

I do understand all this. I was just stating my feelings on the matter. I don't want to argue about it here, but I'd be happy to hear where I'm wrong. I *haven't* looked at the lawsuit or any stated penalties in the securities law. I am *assuming* that this is a private action under the securities act for selling unregistered securities. My feeling is that cases in the US are generally decided fairly, and at *worst* prosper would be on the hook for losses and maybe statutory interest and fees. This is what? like 10% of the prinicipal value tops? Even with a 3 year SOL, that wouldn't be anything near 40m+. Did I do math wrong? Is there some sort of mandatory penalty on top of making investors whole?

I should say I may be biased since I have a very negative view of almost all of these lawyer initiated CA investor suits, where some people lose money because an investment didn't work out, then a handful sue as a class, often over unrelated matters. Here, the fact that these may have been securities that should have been subject to registration seems wholly irrelevant to the losses. When I see these suits with so little 'moral' merit, there's usually a nuisance settlement following. Still, I'm happy to entertain explanations of why this one is different.

[God-Father]

[I do understand all this. I was just stating my feelings on the matter. I don't want to argue about it here, but ....................

Seems like an awful lot of but to now want to argue.   

[Icy]

I've been on this forum for 5 minutes reading about Prosper and I already want to dump my Prosper notes in Folio and cash out even though I'm getting a 13.5% (not seasoned) return so far.

I should have looked into this more before getting into it.

Hmmm...

[havastat]

Although Prosper did very badly in its early years and still isn't very strong on collections, it has improved its ability to select candidate borrowers considerably over the years, and its returns since its 2009 relaunch have been better than Lending Club's for 2009-2011, as www.lendstats.com shows. (Lending Club appears ahead for 2012 so far, but I wouldn't give the current year data a lot of attention as it's still too early to see the effects of defaults.). There are some risks: it has never made money and has stayed alive only because venture capitalists have been willing to buy its stock, and it has a class action lawsuit against it over its earlier (pre-2009 SEC registration) lending practices.

That said, Prosper's outlook is considerably better now than it was a year or so ago. Its originations have been growing very rapidly (although not as rapidly as Lending Club's) and it is moving  closer to profitability (although still quite far away). It has developed a strategy to shield new notes from the consequences of the lawsuit by holding the new notes under a different legal entity from the old ones in the hope a suit against the old entity won't be able to reach the assets of the new one. The strategy may work, and even if the lawsuit is successful, it may not ultimately recover much.

[mothandrust]

That said, Prosper's outlook is considerably better now than it was a year or so ago. Its originations have been growing very rapidly (although not as rapidly as Lending Club's) and it is moving  closer to profitability (although still quite far away). It has developed a strategy to shield new notes from the consequences of the lawsuit by holding the new notes under a different legal entity from the old ones in the hope a suit against the old entity won't be able to reach the assets of the new one. The strategy may work, and even if the lawsuit is successful, it may not ultimately recover much.

And when the new legal entity runs into financial or legal trouble, they can create a newer legal entity which will try to shield the assets from creditors who have claims against the new legal entity.  And so on...

[Ray Kremer]

If Prosper survives the lawsuit, becomes profitable, and keeps going strong for a few years after, I may consider lending with them again. As it is now I think it's too risky. I did make a profit on my batch of loans that are in their final months though, so it was good while it lasted. I would consider Lending Club but the last time I checked I don't meet their requirements.

[God-Father]

If Prosper survives the lawsuit, becomes profitable, and keeps going strong for a few years after, I may consider lending with them again. As it is now I think it's too risky. I did make a profit on my batch of loans that are in their final months though, so it was good while it lasted. I would consider Lending Club but the last time I checked I don't meet their requirements.

+1

[NewHorizon]

If Prosper survives the lawsuit, becomes profitable, and keeps going strong for a few years after,  I may consider lending with them again.

For myself, and even with basically a new cast at the executive level, Prosper's moral center when it comes to the treatment of lenders - like implementing agreements that lenders didn't sign - is still a big dark shadow over all else.

[ira01]

If Prosper survives the lawsuit, becomes profitable, and keeps going strong for a few years after,  I may consider lending with them again.

For myself, and even with basically a new cast at the executive level, Prosper's moral center when it comes to the treatment of lenders - like implementing agreements that lenders didn't sign - is still a big dark shadow over all else.

+1.  I would never do business with Prosper again, regardless of the returns it provides -- at least not without a complete replacement of all its executives (especially Chris Larsen), and an apology for its past behavior and assurances that it has changed its mindset. 

[Fred93]

For myself, and even with basically a new cast at the executive level, Prosper's moral center when it comes to the treatment of lenders - like implementing agreements that lenders didn't sign - is still a big dark shadow over all else.

Yep.  Especially true when they're not the only game in town.  Lendingclub works fine, and they have never done the bad things that Prosper has done.

In other words, either an absolute or a relative argument comes out with same answer.