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Author Topic: Yet another puzzling (and troubling) change in the Lender Agreement  (Read 7978 times)

ira01

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The February 12, 2007 version of the Lender Agreement (which governs my relationship with Prosper), conatins the following paragraph 6(f), which deals with the default sales:
Quote
f. Notes that become over 120 days past due are written off as uncollectible, and sold to a debt buyer authorized and willing to purchase consumer loans. Proceeds, if any, from the sale, less expenses of sale, will be paid to you.


The current version (dated November 8, 2007) reads as follows:
Quote
f. Except in the case of borrower bankruptcy, Notes that become over 120 days past due are charged off and offered for sale to an unaffiliated debt buyer authorized and willing to purchase consumer loans. You authorize Prosper to offer for sale and sell your Notes that become over 120 days past due to a debt buyer in accordance with this Section. Because debt purchasers buy many past-due Notes at once, Notes that are in default might not be offered for sale at the point at which they are exactly 120 days past due, but may remain unsold for some period after they are 120 days past due. Collection efforts will continue until the Note is actually sold to a debt purchaser. Proceeds, if any, from the sale of your Notes, less expenses of sale, will be paid to you. No portion of the proceeds of a defaulted Note sale will be paid to any group leader. PROSPER DOES NOT GUARANTEE THAT A NOTE WILL BE SOLD AT A DEBT SALE, OR THAT YOU WILL RECEIVE ANY PROCEEDS FROM A DEBT SALE OF YOUR NOTE.

Certain aspects of this have previously been discussed, but I don't believe the portion I bolded has been discussed.  What in the world is this supposed to mean?  Read literally, it means that all you sucker GL's out there won't receive any money from debt sales, even on defaulted loans in your lending portfolios that are not in your group.  Or did they mean to say that if a GL bid on one of their group member's loans, that you won't receive any of the JDB proceeds if that loan defaults?  Or did they mean to say that you won't receive anything by virtue of being a GL, but if you are a lender on the loan, you still get what you would if you weren't a GL?  Or did they mean something else entirely?  Who knows with Prosper, but they really need to find a new lawyer to draft their legal agreements -- they are horrible.
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traveler505

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #1 on: December 26, 2007, 02:42:47 pm »

Yep, that ranks right up there with the prohibition on borrowers using the proceeds of the second loan to pay off the first one.

It seems to me that the only interpretation which Prosper could make on a retroactive basis with regard to lenders who are also group leaders would be that group leaders do not receive any portion of the sale proceeds by virtue of their role as group leader.  (The lender and group leader agreements have always indicated that no group leader fees are due on payments which are more than 30 days late, and proceeds from debt sales will always be more than 30 days past the due date.)

On the other hand, lenders who are not group leaders might want to take advantage of the language to claim that they are entitled to a larger portion of the loan proceeds, if lenders who are also GLs are precluded from receiving a share.
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ira01

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #2 on: December 26, 2007, 04:13:32 pm »

On the other hand, lenders who are not group leaders might want to take advantage of the language to claim that they are entitled to a larger portion of the loan proceeds, if lenders who are also GLs are precluded from receiving a share.

I don't think I will have any defaults this sale, because my one 4+ month late hasn't been 4+ for that long, so it probably won't be sold off this time.  Otherwise, I would definitely make that claim to Prosper.  Hopefully, someone else will -- xraider, do you have any defaults sold or to be sold in this sale?
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Staneslav

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #3 on: December 26, 2007, 11:02:03 pm »

a
« Last Edit: December 11, 2017, 02:14:57 pm by Staneslav »
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lhsbandnurd

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #4 on: December 27, 2007, 12:22:57 am »

We are hosed.
Why? You don't really think we all just retroactively agreed that we will give up any claim to our pennies should ------- choose to withhold them, do you?
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traveler505

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #5 on: December 27, 2007, 05:54:03 am »

PROSPER DOES NOT GUARANTEE THAT A NOTE WILL BE SOLD AT A DEBT SALE, OR THAT YOU WILL RECEIVE ANY PROCEEDS FROM A DEBT SALE OF YOUR NOTE.


We are hosed.

But, as a fiduciary, Prosper has an obligation to make reasonable efforts to obtain the maximum possible proceeds for the lenders when the debts are sold.
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dvd

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #6 on: December 27, 2007, 06:46:35 am »

Its also interesting that the debt buyer has become an "unaffiliated debt buyer" now.  :)

- dvd
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Greebo

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #7 on: December 27, 2007, 07:29:04 am »

There could never be any guarantee that defaulted loans would be sold.  Selling junk debt requires a buyer.
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Staneslav

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #8 on: December 27, 2007, 08:09:46 am »

a
« Last Edit: December 11, 2017, 02:14:50 pm by Staneslav »
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Xenon481

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #9 on: December 27, 2007, 08:14:00 am »

Since the details of the transaction are not readily known, how do you know that you're getting the full amount?

Trust?   :ninja: :ninja:

traveler505

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #10 on: December 27, 2007, 08:15:39 am »

Since the details of the transaction are not readily known, how do you know that you're getting the full amount?

We don't.  The debt sales have no transparency whatsoever.  AFAIK, Prosper has never said whether it is deducting the costs of conducting the sale from the price paid to lenders (which it is entitled to do under the Lender Registration Agreement), and, if so, how much it is taking.
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joezyz

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #11 on: December 27, 2007, 08:24:29 am »

Since the details of the transaction are not readily known, how do you know that you're getting the full amount?

I hope you would NEVER imply that P would EVER do anything to hurt me as a lender.
I believe in P, and I know they have my best interest in their very capable hands.

[/sarcasm]
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joezyz

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #12 on: December 27, 2007, 08:27:07 am »

Since the details of the transaction are not readily known, how do you know that you're getting the full amount?

We don't.  The debt sales have no transparency whatsoever.  AFAIK, Prosper has never said whether it is deducting the costs of conducting the sale from the price paid to lenders (which it is entitled to do under the Lender Registration Agreement), and, if so, how much it is taking.


Traveler...
That comment made me sick to my stomach, when I realized what could be happening.  It makes me believe that P would take the full cut for their fees and let us divide what is left over.

Yuck!!
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Greebo

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #13 on: December 27, 2007, 09:58:32 am »

Since the details of the transaction are not readily known, how do you know that you're getting the full amount?

Trust?   :ninja: :ninja:
BWAHAHAHAHHAHAHAHAHAHAHAHAHAA
*stops to breathe*
BWAHAHAHAHHAHAHAHAHAHAHAHAHAA
BWAHAHAHAHHAHAHAHAHAHAHAHAHAA
*passes out*
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ira01

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Re: Yet another puzzling (and troubling) change in the Lender Agreement
« Reply #14 on: December 27, 2007, 12:32:40 pm »

Since the details of the transaction are not readily known, how do you know that you're getting the full amount?

We don't.  The debt sales have no transparency whatsoever.  AFAIK, Prosper has never said whether it is deducting the costs of conducting the sale from the price paid to lenders (which it is entitled to do under the Lender Registration Agreement), and, if so, how much it is taking.

That's another good point.  For all we know, the JDB on the December sale really paid 6% (or more), and Prosper took half (or more) of the proceeds as its "costs," leaving the lenders with the paltry 3% that we have seen so far from this sale.  Given all of Prosper's other mis-steps and mistakes, to say nothing of its ethically challenged behavior in many areas, I certainly have no faith that they are not sticking it to the lenders on the default sales.  Something else to add to the growing list of discovery needed when the eventual lawsuit commences.
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