Friday, March 28, 2008

Prosper nostalgia

I miss Prosper - the old Prosper. The Prosper that was a community of lenders and borrowers. I were looking through my Prosper and Lending Club accounts today (perhaps sometime I should post referral links and make some money of the one or two people who read my blog).

Anyway, here's the short summary:

Lending Club, after I deposited $500 into a Lending Club portfolio in August 2007:

On Prosper, the situation is more complicated. I've been a lender since May 17th, 1006. Prosper doesn't show all my loans in summary, only the active loans. I think about 57 of my Prosper loans have already fully repaid, one has been repurchased and two have defaulted, but here's the active loan summary:

I initially made loans by manually selecting listings, often after lengthy discussions on the old forums. That wasn't a profitable way to invest larger sums of money - pleasant yes, profitable no. But after Cellardoor and the other enthusiasts started drifting away, the forums became more and more poisonous - certainly not helped by the increasing frustration of lenders seeing lates pile up.

I switched to Standing Orders (SOs) and for a while there my standing orders performed admirably well, with all my lates falling only in the category of loans that I manually bid on. Lately that has changed, with a substantial portion of my new lates also coming from bids placed by SOs.

There are so many things wrong with the entire concept right now, it's hard to pinpoint what would revive my interest in lending on Prosper again. For now, I think the quieter waters of Zopa (create a CD and walk away for a year) or Lending Club (where I only ever selected a single portfolio) is preferable to the rough-and-tumble that is Prosper.

If Lending Club have warts in the loan verification process, the collections process and the lender/borrower interaction process, I've not seen them. I've seen those on Prosper and I've not seen solid, concrete evidence that Prosper will address these issues in a way that will make me want to lend there again. There truly needs to be a more in-depth discussion of Prosper, but the magnitude of the task is overwhelming and very, very complex.

And dammit, I didn't want this to turn into another bash at Prosper, I just wanted to review my loans there, the good, the bad and the ugly. But really, why should you care? If you had to ask me, I cannot in honesty tell you to put money into Prosper right now, nor can I tell you to seek a loan there. Not while their verification is haphazard, cumbersome and invasive, not while their collections process is apathetic and ineffective and their anti-fraud prosecutions are slow, spotty, minimalist and ineffective.

Can you believe that there is no clause in a Prosper Borrower Agreement to recover legal costs from a borrower if Prosper has to take action against the borrower? So if the borrower has a relatively small loan and sends Prosper a "cease-and-desist" letter, Prosper's only recourse is legal action, but that cost has to be borne by Prosper (or the lenders)and it is not cost-effective for a small loan. So essentially, the borrower will pay with a credit reporting agency blemish for the money they walk away from Prosper with.

About the only thing that is right with Prosper is the lender guidance where they have started taking great pains to warn lenders away from loans that have historically performed poorly.

And how the new portfolio plans are performing? Well, that's the topic of much speculation. I do believe LoanChimp blogged extensively about that on his blog.

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