Saturday, May 24, 2008

Prosper.com - a mishandled loan

Prosper.com is often sloppy when servicing loans. I'm going to show you an example. Its an anecdote to be sure, but there are many such anecdotes in the naked city.

Loan #2139 originated July 27, 2006. The one and only payment made by the borrower occurred a few days later on August 6, 2006. The loan is still hangin' around, now about 22 months late.

Prosper, by its stated policy, is supposed to sell loans when they are 4 months late. This one fell thru the cracks. It is unclear whether there has ever been any attempt by prosper to collect. Seems that during much of the past 2 years, Prosper assumed this borrower was in bankruptcy, when in fact he was not. Once a loan is coded as "in bankruptcy", it gathers dust on Prosper's back shelf, no collection attempts are made, and the lenders lose their money.

Back to the story. A lender, who shall remain nameless, sent me a copy of this dialog with prosper. The lender quoted below waited patiently 1.5 years and then begain a dialog with Prosper.

From:
To:
support@prosper.com
Subject: Re: Other (I am a lender): Please explain below

Could someone please explain why this loan has not ever been included in the JDB sales? They have made ONE payment and that was a month after the loan originated and was over 1.5 years ago. If it is possible fraud, it seems that would have been discovered by not.

https://www.prosper.com/secure/account/lender/lender_loan_details.aspx?id=2139

Thank you

Here's Prosper's initial response.

From: "\"Prosper customer support\" <support@prosper.com>
To:
Subject: Re:Other (I am a lender): Please explain below [ ref:XXXXX:ref ]
Date: Jan 2, 2008 2:45 PM

Dear XXX,

Prosper recently selected some 4+ month late loans to be included in a new collections test. This test is still ongoing and therefore these loans were not sold. More information on the test will be release as soon as it is available in January. Thank you for using Prosper Marketplace.

For future reference, your Prosper support case number is XXXXXXXX.

Sincerely,
Prosper Customer Support
Join us for Prosper Days 2008: Prosper community members and...

Well, that response is incorrect. This loan wasn't in the new collections test. That's just a stock answer that the CS person grabbed for a quick response. That happens sometimes. Our friendly lender tries again...

From: XXX [XXX@XXX.com]
To:
support@prosper.com
Subject: Re: Re:Other (I am a lender): Please explain below [ ref:XXXXX:ref]

Here's what I said the first time you sent me this email:

I don't think you understand. This borrower has not made a payment since AUGUST 06. That's over a year ago and it was the only payment they have made. Your new collections test wasn't instituted until the last few months. THIS WAS 120+ DAYS LATE OVER A YEAR AGO. Right now it is showing at Penncro, not the new agency and it's showing it has only been at Penncro for 2 months. Surely you see that there's a problem with this loan???

Not making progress with customer service, our lender sent a message directly to a prosper employee...

From: XXXX [mailto:XXX@XXX.com]
Sent: Friday, January 04, 2008 2:48 PM
To: aprosperemployee
Subject: Fw: Re:Other (I am a lender): Please explain below [ref:XXXXXX:ref ]

Hi XXXXXX - ... I'm hoping maybe you can get to the bottom of this. I can't tell if this is someone who filed BK, then had it canceled, got lost in the cracks, is a possible fraud case you guys were working on, knows someone who knows someone who knows someone or what. But obviously the response I received didn't address the issue.

To reiterate - they have made ONE payment. That was in August 06 - well over a year ago. It's never been sold and it's showing that it's only been in collections for 2 months.

Any illumination you can provide will be greatly appreciated since I'm pretty sure you're the only one there who knows what's going on, lol

Thanks,
XXXXXX

This time our lender got a response that actually tells us something about what happend to this loan...

From: Prosper customer support <support@prosper.com>
To:
Subject: Re: Re:Other (I am a lender): Please explain below [ ref:XXXXX:ref ]
Date: Jan 4, 2008 6:45 PM

Dear XXX,

This was a borrower who told us she was going to file bankruptcy, which kept her out of a couple of debt sales. Once we realized that she was not actually filing bankruptcy, we took the bankruptcy tag off of the loan, but it was too late to be included in the latest sale. According to our debt sale folks, we're going to try to include it retroactively in the last debt sale. Failing that, we'll include it in the next one.

For future reference, your Prosper support case number is XXXXXX.

Sincerely,
Prosper Customer Support
Join us for Prosper Days 2008: Prosper community members and...

Whoa! It appears that when a borrower tells Prosper that they're going to file bankruptcy, Prosper ceases trying to collect. This apparently happens whether the borrower has indeed filed bankruptcy or not. Then, when they discover their error (over a year later) they send the loan to the junk debt buyers. Well

You might be inclined to think that Prosper's collection agents are hard at work on this loan, but I'm not so sure. The customer service message above says the bankruptcy flag was removed but, even to this day, this loan is still flagged in Prosper's database as "in bankruptcy".

http://prospers.org/blogs/media/blogs/Fred93/2139prosper.jpg

loan 2139 status

If I were the collection agent for this loan, and I saw that flag, I would not call the borrower. It is reasonable to assume that Penncro and now Amsher have ignored this loan because Prosper's database shows it in bankruptcy, and that no collection attempts have ever been made.

Lenders have no transparency into the handling of late loans. This makes it difficult for lenders to check up on Prosper's handling of our loans. Only in extreme cases such as this do we learn a bit about what actually goes on.

Prosper, please take lenders seriously. Improve your handling of late loans. An external audit of the entire late loan handling process might be an appropriate jesture .

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