CR,
I know this won't be a popular post from me, but most of your problems here seem to stem from your own mis-steps and not Prosper's mismanagement. I'll tell you why. The most glaring error I think you made was that you assumed way, way too much... especially for a one-of-a-kind investment startup on the internet.
I trusted their verification process was similar to every other lender in the US. Why did I think this? I have taken loans out before, once with Quicken an internet based Loan Company. I had to get a notary to verify my identity before I faxed them back the paper work for getting a Loan.
First, did you actually *read* what happens on the borrower's end of things? There was never any mention of a notary public required. I've never had *any* financial document notarized.
More importantly to me at the time was the identity theft guarantee they made. I actually thought they would attempt to ensure they would not have to pay out by Identifying who was actually asking for the loan, my mistake. I guess they did ensure that they would not have to pay out on identity theft. If it was not for that guarantee I actually would not have put money in the system. I would have taken that $500 bucks and spent it on myself.
Prosper claims they take commercially reasonable steps to verify identity. I think they would win their argument in court, tbh. I'm fairly certain most ID theft cases arise from family -- and really, ahead of time, there are commercially reasonable limits as to how much verifying can be done. I mean, come on, my dad has all of my contact info, my ss#, you name it. If Prosper calls him up, how is Prosper going to really know who they are talking to? They won't.
Now, how they handle alleged ID theft cases is a different story. If they find they are paying out too much in claims, I guess they should reconsider what "commercially reasonable" ID efforts are then, right?
I trusted the 5 star group rating system that they had. You will note many of my loans were for a specific group, my mistake.
You're kidding me, right? How much involvement did you have with the platform before you started lending? And if it was none, then why didn't you do any real due diligence prior to investing?
I believed their quoted default rates were actually true. I followed their advice, bid at a percentage equal to what I wanted to earn plus the default rate for that credit grade, my mistake.
What quoted default rates are you referring to? Early on, that Experian data was irrelevant to the platform, and I think anybody who has sharp critical thinking skills knew it. The overall average number that CL would toss around in the media is a different story, but largely useless. After all, the overall site wide default rate had absolutely no influence on any specific loan on which I bid.
Did you double check their advice on bidding rates? I did, and maybe it was ok for a quick "newbie rule of thumb" but I also knew it was far from perfect.
I thought collections would be handled better and there would be law suits chasing after the dead beats. There was a period in my life when I did not handle money very well, and I ran into this. Straightened up my act real quick, my mistake.
Really? There was a point in my life where I didn't handle money well either, but I never got sued... I got lots of phone calls. I also knew that if I were to get sued, it would be by a third party and NOT the original creditor. Honestly, and you can check my posting history to verify this if you want, but I have always been on record as saying that my lending activities assumed that collections would be ineffective. I
knew that the most drastic action Prosper would take while I still had rights to the loan (and the ability to recover) was phone calls, letters, and emails. It's way too easy for a deadbeat to ignore those, so I expected no recovery.
If you look at my dialogues with Fred93, you'll notice that I advocated for a system that would allow Prosper lenders to benefit from aggressive collections techniques (ie lawsuits, garnishments) and not selling that off to a third party at the 120 day mark. That's where Prosper is going with the NAT thing, albeit slower than molasses.
I knew there were risks to lending and if I was losing money and the majority of prosper lenders were not, I would definitely know it was entirely my fault. I admit I am not a financial wiz, let alone a financial professional. But even Financial Professionals got their ass handed to them. The majority of lenders with more then a few loans and loans greater then 3 months old, are losing or are starting to lose money.
I actually feel like Prosper stole my money. Oh they did not directly steal it no. They just CHARGED me so someone else could steal my money.
With the irrational exuberance in which lenders chased subprime loans, I'm not surprised many portfolios are in the crapper. SO MUCH of the early loans were in the subprime areas, and guess what? Financial professionals who did significant amounts of subprime lending away from Prosper got their butts handed to them too. How many banks have failed? How many CEO's are out on their bum? Additionally, lenders have been pricing loans at rates that are too low, compounding the problem. Look at the current average loan rates for the E and HR group -- they differ by about 1%. Yet, the HR's were to predicted to be significantly more risky. Where was the risk premium in the loan rate? Lenders screwed the pooch on that one, that's for sure. Absolutely none of that is Prosper's fault.
Do I believe Prosper is perfect? Oh heck no. I believe they're too dense to realize they have problems, and are way too slow in correcting them. My absolute biggest pet peeve is for the callous disregard in which they treat the Lender Registration Agreements. I'm not a lawyer, but they have a contract with me... a contract which they walk all over whenever it suits them, and there is absolutely nothing I can do about it. Right now, that alone is the single biggest reason why I don't lend anymore.
BTW, if you think I'm bitter over my returns, check them... lendingstats has me at a pretty decent ROI, especially considering the age of my loans. However, I'll caution you -- I'm quite certain my true return is pretty close to zero.