prosper.com

SEC orders Prosper to cease and desist

wiseclerk 12 Comments

In a SEC filing of yesterday, the SEC has ordered Prosper to cease and desist. On page two it states that

The loan notes issued by Prosper pursuant to this platform are securities and Prosper, from approximately January 2006 through October 14, 2008, violated Sections 5(a) and (c) of the Securities Act, which prohibit the offer or sale of securities without an effective registration statement or a valid exemption from registration.

From page six:

In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondent Prosper’s Offer.
Accordingly, it is hereby ORDERED that:
Pursuant to Section 8A of the Securities Act, Respondent Prosper cease and desist from committing or causing any violations and any future violations of Sections 5(a) and (c) of the Securities Act.

So far Prosper has not commented on the situation.

Prosper refers loan applicants to other companies

wiseclerk 1 Comment

When Prosper.com went in the quiet period the company announced on its blog:

If you’re a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources.

The way this works is that Prosper refers loan applicants to other lending companies. After answering a few questions, borrowers seeking a loan a channeled to Firstagain, Lendingtree, Freedomfinancialnetwork or Creditkarma (and potentially others – the mentioned ones are the ones I was shown).

Should a borrower use the services of one of the linked companies then Prosper is paid a referral fee.

However apparently not all visitors of the site seem to be redirected. Potentially members or former users with cookies are not shown these options.

Options shown for potential borrowers

Options shown for potential borrowers

Prosper loses several lawsuits against non-payers

wiseclerk 1 Comment

One of the downsides of p2p lending service Prosper.com are high default rates. Results from collection attempts are low.

In an attempt to test alternatives to the existing collection process Prosper in January selected 66 cases of nonpaying borrowers and turned them over to the law firm Hunt & Henriques to pursue these cases in court.

Fred 93, one of the lenders on these loans researched the status of the court cases himself, dissatisfied that Prosper did not inform him on the status, which he says Prosper initially promised to do monthly.

According to Fred93’s findings, Prosper.com so far lost 6 cases and won 1 case.

Prosper enters quite period for registration statement filing

wiseclerk 1 Comment

LogoProsper.com announced that it is entering a quite period:

Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future.

The registration filing is a necessary step toward making the secondary lending market available to the community. This is something many of you have been asking for, and we believe the liquidity of a secondary market will make Prosper even more vibrant.

Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. If you’re an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you’ll be able to track and monitor your loans; and you’ll be able to withdraw funds from your Prosper account.

See Prosper blog announcement. Prosper seems to be copying the route Lendingclub.com already successfully completed.

Further coverage at Prosper Lending Review and Personal Loan Portfolio.

Some Prosper news

wiseclerk

Short news update on Prosper.com developments:

  • Changes at the Prosper management team: John Witchel (former CTO) and Tom Pigoski are no longer listed as part of the management team. A comment on this blog post indicates that John Witchel has left the company while Tom Pigoski is on family leave. Chris Denend is now CTO.
  • Prosper says it will enable faster listings for qualified borrowers. In a streamlined process some borrowers may post loan listings without adding a title, description or picture.
  • Reading statistics published by Prosper? Have a good look on the definitions! In the market survey results, published on Aug. 12th, it looks like on some parameters the year to date figures for 2008 are rising compared to 2007. However looking in the definitions, Prosper compares 7 months in 2008 to 6 months in 2007. (quote:
    2008 Year-to-Date: January 1, 2008 through July 31, 2008.
    2007 Year-to-Date: January 1, 2007 through June 30, 2007.    )

Prosper.com operating costs

wiseclerk

The Prosper study I featured yesterday lists the Prosper fees. While it does not attempt to calculate the revenues of Prosper.com it gives some indications regarding the operating costs:

According to Mendelson (2006), the primary costs of Prosper consist of …, (2) a $4 fee for identity authentication, credit pulling, and bank-account setup per active borrower, (3) customer service at the average rate of four interactions per loan and $2 per interaction, and (4) a fixed overhead cost of approximately $3 million per year. …

Given these estimates, it is difficult to measure Prosper accounting in precision. However, there is no doubt that Prosper’s revenue does not cover its full cost (as of February 2008). The difference is met by a large stock of venture capital.

Regarding the Prosper revenues, Mike did a calculation estimating the November 2007 revenues at 114,000 US$. If this is correct, it did not even cover fixed overhead.

Prosper changed fees since that last calculation.