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[havastat]

I doubt post-SEC lenders would get paid back in the order of their investment. I also doubt pre-SEC investors would get paid in full (or anything close to in full) in a bankruptcy. Whatever the class action judgment might say, it would likely be modified in bankruptcy to even out the hit to the post-SEC investors.

[havastat]

Nominate for lobby

[Mark12547]

Are there reasons to join Prosper.com? Any advantages Prosper may have over other similar lender organizations?

[mtrauch]

Are there reasons to join Prosper.com? Any advantages Prosper may have over other similar lender organizations?

Well, the returns are a few % better even picking loans randomly, and the rating system is naive enough that one can do a lot better. In my case, I get a good bonus on deposited funds, too. But as they've gotten better at grading risk, the excess returns are (I think) diminishing, and I expect fewer bonus opportunities in the future. If I were investing new money now, I'd probably put 2/3 of it in LC.

I do think prosper is doomed to be sold, probably at a loss to some VC's. But I have (almost) no concerns about my money. The class action is a joke with minimal potential damages, and so BK is pretty much out of the question. They could run off the existing loan block profitably.

[ira01]

The class action is a joke with minimal potential damages, and so BK is pretty much out of the question.

Please share the basis of this conclusion.  Because there are two California lawyers who post regularly on this board that we know of, and both of us think that the class action is highly meritorious and likely to result in a huge judgment or very large settlement.  Are you aware that Prosper and its insurance company has spent well over two million dollars defending this lawsuit already (unfortunately for Prosper its policy limits have been reached, so all of its defense costs now come out of its pocket), and that the trial judge and the California Court of Appeals has already rejected a number of its claimed defenses?  Hardly signs of a "joke."  As for potential damages, they are easily in the tens of millions of dollars. 

[xraider]

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.

[Beerbud1]

2nd for Lobby!

[Nora_Lenderbee]

Are you aware that Prosper and its insurance company has spent well over two million dollars defending this lawsuit already (unfortunately for Prosper its policy limits have been reached, so all of its defense costs now come out of its pocket), and that the trial judge and the California Court of Appeals has already rejected a number of its claimed defenses? 

Imagine Prosper had spent that $2 million on buying back the obviously fraudulent loans. The lenders made whole would be happy. All lenders would view Prosper favorably, as a partner acting in good faith and doing its best. And Prosper would be not a penny poorer.

Imagine all the pee-pul . . .

[ira01]

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. 

[Fred93]

They could run off the existing loan block profitably.

That's a rational business plan, once they give up trying to make the business fly, as they will very likely do at some point.  However, the "they" in that sentence is questionable.  "You" could probably do it, but "they"?

Would be a big change.  Wouldn't be able to rent the top floor of a famous and ornate building in San Francisco, etc etc.  Would require reduction to a skeleton staff.  I don't think there's anyone in Prosper management dedicated to doing this sort of thing.  They would more likely just walk, and let some trustee turn the portfolio over to a loan processor, who won't have software set up to handle these loans divided into tiny notes, so will have a bunch of costs getting up & running, etc.  Big mess winding this sucker down.

Best case scenario: LC buys them and puts them out of their misery.

[divindj]

Should I stay away?

i'd strongly advise you follow this advice: http://www.youtube.com/watch?v=KAp9sFVdERQ

[havastat]

Best case scenario: LC buys them and puts them out of their misery.

But would Lending Club do that before more clarity on how much Prosper is liable for in the class action?

[mothandrust]

Imagine Prosper had spent that $2 million on buying back the obviously fraudulent loans. The lenders made whole would be happy. All lenders would view Prosper favorably, as a partner acting in good faith and doing its best. And Prosper would be not a penny poorer.

+1.  Not really sympathetic with the "defend vigorously" against the legitimate claims of customers.  How about working vigorously towards a fair resolution?

Now they are over a barrel.

[NewHorizon]

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."

[MYCHAELP]

Do you guys suggest someone who already has a Prosper account and has done well for the last 2.5 years diversify into a LendingClub account also? I'm considering this too leverage the risk somewhat.
I'm not asking about getting out of Prosper, but simply adding LendingClub to my portfolio.
Thanks!