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[NewHorizon]

This seems like a good place to post this piece of a Q&A with DF:

Q: Do you have experience with suing people?
A: Oh yes. Between First Select and Credigy, I have been responsible for making the decision to sue more than 150,000 people. There are a lot of lawyers that can’t claim that number of suits in a lifetime.

Q: Well why don’t we just sue everybody?
A: The phrase “blood from a turnip” comes to mind. One of the ways that you can go broke in a big way is by suing people that will never be able to pay you at all. Simple math, it costs a lot of money to sue people.

Q: Okay, so you need to decide who to sue, then what?
A: Put quite simply, my philosophy is this – if you won’t pay, but can (or will in the future) be able to pay, I’m going to sue you. If I sue you I’m going to win.

Q: That sounds kind of arrogant, can you back it up?
A: Courts in seven states have recognized me as an expert at consumer debt litigation. At Credigy, if a case got really nasty, I would go testify live. I refuse to lose.

Q: Really? What’s your win/lose record?
A: In my last 18 months at Credigy, I testified live at 42 trials. My record was 41-1. By the way, I fired the law firm where we lost.

Q: What’s the toughest aspect of this type of lawsuit?
A: By and large, judges are comfortable if you can show them a signature on a piece of paper. The vast majority of judges grew up long before the internet and the passage of the “e-signature” bill during the Clinton administration. Sometimes you’ve got to spend a lot of time educating them.

Q: How do you do this?
A: I have been qualified as an “expert witness” in seven states on the subject of the electronic records of consumer lending transactions. There was a judge in Texas that had me on the stand for more than three hours – the majority of the time, the judge was quizzing me. Other than I missed the last flight home, I thought it was time well spent – he never questioned any of our requests for default judgment after that.

(linky)

[Senator]

Just picking a nit here but postage went up to 42 cents as of Monday, May 12.

Prosper still charges lender fees, right?  And what do the lenders get for those fees?

[MustardTree]

When Prosper was conceived, the founders didn't realize...  etc...

I think that one of the main reasons that I ever got involved with Prosper was because of the "founders".  I was under the impression that the "founders" were the same as those that started eLoan.  Does eLoan have these kinds of collection problems?  I thought that Prosper and Prosper Collections were run by professional people with experience. 

The 2007 interview with Doug is very impressive, but the results seem to indicate more problems, instead of solutions.

While I am "venting", another complaint is the "100% guarantee" of no losses due to identity theft.  For some crazy reason(my own fault), I thought that this included borrowers who commit intentional fraud.  The most obvious are denoted by borrowers who do not even make one single payment.  Has the "100% guarantee" ever saved a lender from having a loan loss?

Finally, If Prosper declared bankruptcy; wouldn't the courts appoint a professional fiduciary? 
Could that be better than having Prosper as the current fiduciary? 

.

[Fred93]

When Prosper was conceived, the founders didn't realize...  etc...

I think that one of the main reasons that I ever got involved with Prosper was because of the "founders".  I was under the impression that the "founders" were the same as those that started eLoan.  Does eLoan have these kinds of collection problems?  I thought that Prosper and Prosper Collections were run by professional people with experience. 

Chris Larsen founded eloan.  The other founder, John Witchel, has I believe no background in loans.  He's a tech guy.  I think eloan just bundled up loans and sold 'em, in which case maybe they didn't deal with collections at all.

While I am "venting", another complaint is the "100% guarantee" of no losses due to identity theft.  For some crazy reason(my own fault), I thought that this included borrowers who commit intentional fraud.  The most obvious are denoted by borrowers who do not even make one single payment.  Has the "100% guarantee" ever saved a lender from having a loan loss?

The Prosper ID Theft guarantee is very limited.  I've had 5 loans repurchased by prosper at full value (out of 815 loans I've participated in).   I recall 2 or 3 of those were a special case where prosper had screwed up some of the credit info early on, so repurchased the loans because they might have misled us.  The remaining 2 or 3 they didn't tell us anything about, so those are probably ID theft.

I have a theory that there are more cases of identity theft, but that prosper probably doesn't look very hard so doesn't "see" other cases.  I have no evidence to back that theory other than my general understanding of the process.  Here's my idea.  Suppose I steal your identity.  Prosper's collection agent starts calling you.  You say "I never heard of prosper."  Collection agent says to himself "Why don't they think up more original stories?"  He has of course heard this excuse before.  So... he doesn't immediately think ID theft.  Later after many calls you send them a letter telling them to stop calling you.  They stop.  Still nobody jumps up and shouts "ID theft".  This could happen.  I figure the rubber might hit the road when they attempt legal action, but of course they have never done that to ordinary late borrowers before, and are just now starting it on a small fraction of the total number of really old late loans.  It will be interesting to see if any of those suits fail due to the defendant being the wrong guy.

[Nora_Lenderbee]

While I am "venting", another complaint is the "100% guarantee" of no losses due to identity theft.  For some crazy reason(my own fault), I thought that this included borrowers who commit intentional fraud.  The most obvious are denoted by borrowers who do not even make one single payment.

Prosper's guarantee is limited to cases of ID theft--a person using another's ID to get a loan. A borrower who takes out a loan with the intent of never repaying, but without using someone else's identity, is not covered by the guarantee (even though it clearly is fraud).

(Also, as fred points out, we don't know that they even pursue ID theft unless it is absolutely unavoidable.)

[Senator]

I never thought of that.  hhhmmmmm....

The lawsuits could uncover as many ID theft cases as recoverable loans.  Prosper itself would have to pay lender's 100% of the ID theft cases since some lenders are lawyers and can view the details of those cases.  And lenders would get something back from the recoverable loans.

Out of 66 lawsuits, I predict that 6 (10%) are ID theft cases, and 6 (another 10%) have assets in which to pay, and, well, 54 (80%) either can't pay.

Anyone else care to speculate on the numbers?

-S.

[SGriff]

I never thought of that.  hhhmmmmm....

The lawsuits could uncover as many ID theft cases as recoverable loans.  Prosper itself would have to pay lender's 100% of the ID theft cases since some lenders are lawyers and can view the details of those cases.  And lenders would get something back from the recoverable loans.

Out of 66 lawsuits, I predict that 6 (10%) are ID theft cases, and 6 (another 10%) have assets in which to pay, and, well, 54 (80%) either can't pay.

Anyone else care to speculate on the numbers?

-S.

Online PDL's are starting to fizzle out because there's no signature card, and if someone claims ID theft, the company has no proof to back up their claim.

I suspect Prosper is soon to be in the same boat. Wouldn't it really, really suck for Witchel if all these folks said "ID Theft" in court, and Prosper's legal team couldn't produce hard evidence to the contrary?

[xraider]

That would suck for Prosper but not for the lenders.  Then Prosper would have to make good on its guarantee.

Hmmm.  Maybe that's why Prosper isn't pursuing these suits.

[Senator]

Then you guys are right. 66 is WAY to small a sample. 

[ira01]

I never thought of that.  hhhmmmmm....

The lawsuits could uncover as many ID theft cases as recoverable loans.  Prosper itself would have to pay lender's 100% of the ID theft cases since some lenders are lawyers and can view the details of those cases.  And lenders would get something back from the recoverable loans.

Out of 66 lawsuits, I predict that 6 (10%) are ID theft cases, and 6 (another 10%) have assets in which to pay, and, well, 54 (80%) either can't pay.

A cynical person would note that Prosper hand-selected all 66 NAT loans based on its secret criteria -- one of which could have been making sure that the loans were NOT id-theft cases (as shown by pre-lawsuit communications from the defendants).

[Senator]

ira, Say it ain't so!