Skywalker, welcome.
Prosper went wrong in so many ways, and continues to do so. It remains tone-deaf, and careless.
I stopped lending in 2008, and have 18 notes in charge-off status. 4 show they were charged off because "BK filed." 5 were discharged in bankruptcy. I asked Prosper about the status of the 4 in bk, and found out that it didn't bother to file a timely proof of claim in one, so Prosper is paying it off at the BK payment rate, on a five year plan. What's the status of the other 3? They're likely over one way or another by now, and Prosper hasn't bothered to update them.
I have another 11 defaults in collection, with no payments for years, no updates, nothing. Prosper's agreement with me was that it would sell these notes to junk debt buyers. It didn't sell one of my defaults to junk debt buyers.
Back in the day when I had consumed the Kool-Aid, I thought that the system worked. I called Prosper's collection agency at the time to offer some suggestions. Next thing I knew, Prosper changed the terms of service so lenders couldn't call collection agencies. It also didn't bother to ask lenders to sign them, or even call our attention to the changes.
So, one way Prosper went very south for me is that it hasn't done anything to protect my money. Another way Prosper went very south for me is that it has made things much less user friendly for lenders.
Seeing Prosper's recent results, with 2011 results even worse than 2007-2009, makes me think that Prosper's goal of making as many loans as possible with no consideration of lenders' interests continues.
My husband put it very succinctly: "Why would you possibly make unsecured loans to strangers over the internet?" As the community feature of Prosper disappeared, and Prosper has shown its true stripes, there's even less reason to let this shady company have access to your money.