One thing is for sure. This article could bring in the borrowers in droves. Prosper will now be able to claim it is still attracting people to Prosper. The only problem is that while the borrower numbers will be increasing, the lenders will be decreasing. The fatal flaw to Prosper was that they treated the borrowers as their main customer instead of the lenders. They forgot the number 1 rule of economics, "supply and demand". They worried about keeping the demand (borrowers) high, and ignored the supply (lenders). They did not realize that the demand would always be there. There would never be a lack of borrowers. Prosper needed to increase the supply by courting the lenders. With this in mind, their main effort should have been servicing their lenders. The Idea of P2P lending is great, and could have worked. If/when Prosper fails, it will be because of one fatal error; they failed to do their best for the lenders. There are numerous issues brought up by lenders that prosper has ignored. One example where prosper neglected to service their lenders is the second loans issue. Prosper wanted to introduce second loans to its borrowers, but they ignored concerns lenders brought up. All prosper had to do was make it a condition to obtain a second loan only after the first was paid off in full. They could have even set it up to allow borrowers to obtain second loans that pay off the first loan with the remaining balance going to the borrowers bank account. For example, a borrower still owes 4k on his first loan. He lists for a second loan of 5k. Once the loan is funded and verified, the borrower gets only 1000-fees. Prosper uses the other 4k to pay off the first loan. For obvious reasons, lenders do not like the idea of borrowers having to pay on 2 prosper loans at once. This is especially frustrating for the lenders of the first loan, when both loans go bad.
