Considering that the LRA expressly prohibits modifying the Note terms, I think that if Prosper tried to do this, Prosper would quickly get sued.
This is highly speculative, of course, but I've got a feeling about this...
Once the loans are charged off, are the terms still in effect?
My feeling is that Prosper will make the case that they aren't. They'll claim, and they may or may not be right, that you're no longer holding notes, you're holding junk debt, same as the junk debt buyer would be. That would give them the freedom to use whatever creative post charge-off techniques they feel like using, including settlement or maybe even some sort of creative refinance. The thread by JDBuyer on Creditboards mentioned that his company sometimes offers debtors a brand new credit card to pay off the old debt. Maybe with Web Bank involved now, they can do something like that.
On the whole, I think lenders will be a lot better off with what Prosper is doing than they would have been if the debt had been sold at the prices offered. If Prosper even gets 10 cents on the dollar, you'll be better off. Plus, they'll have real data they can use at the next junk debt offering - "See, we recovered 17 cents on the dollar, and we're not even professional collectors. This debt is worth a lot more than you guys think."
Of course, Prosper could screw it all up.
