Refunds to Lenders and Group Leaders
Lender servicing fees reimbursement
It was brought to our attention that certain Lenders were charged servicing fees in a manner inconsistent with the Prosper Lender Registration Agreement. The agreement (prior to Nov 9, 2007) stated that servicing fees would be charged “only upon Prosper’s receipt of the full monthly payment from the borrower on such loan no later than thirty (30) days after the due date of the payment.” Prosper had instead been charging servicing fees on all payments received, regardless of the amount and timing of the payment received.
As a result of this error we are making the following adjustments and corrections:
- Any lender who has a loan that came from a listing created before Nov 9, 2007 will receive a refund of his or her servicing fees charged in situations where the full monthly payment was not received within thirty (30) days after the due date of the payment.
- Lenders will also receive a refund of servicing fees on such loans when servicing fees were charged on partial payments received within 30 days of the due date, but where the full payment was not received within thirty (30) days after the due date of the payment.
- As of Nov 9, 2008, the Lender Registration Agreement has been updated to allow the charging of servicing fees on all payments, regardless of the amount and timing of the payment received. Lenders on loans that result from listings created on or after Nov 9, 2007 will have servicing fees deducted on all borrower full or partial payments, whenever received.
We estimate the date of the refund mid to late January, 2008.
Forfeited GL rewards on late payments paid to lenders
Another error that was brought to our attention involved the application of group leader Finder’s Payment Rewards. The Group Leader Registration Agreement provides that lenders, rather than the group leader, should receive Finder’s Payment Rewards that relate to loan payments made while a loan is more than 30 days past-due.
Therefore our solution will be as follows:
- Any lender who should have received a forfeited Finder’s Payment Reward will have that reward paid into his or her Prosper account.
- Group leaders who received rewards on late payments in the past will not have these rewards taken back from their accounts.
- Going forward, when loan payments that are subject to Finder’s Payment Rewards are made while a loan is 30 or more days past-due, the Finder’s Payment Reward will be paid to the lenders on the loan.
We estimate the date of the refund to Lenders in mid to late February, 2008.
The servicing fee error was a drafting error on our part, while the Finder’s Payment Reward error was a programming error. In both cases, the errors were inadvertent errors on our part.
Group Leader rewards withheld with no mention in GL or Lender agreements
Lastly, Prosper has been holding Finder’s Payment Rewards that accrue during the first 3 months of a loan’s existence, and not disbursing them to group leaders if the loan subsequently goes into default (in which case the rewards are paid to the lenders on the loan). The Group Leader Registration Agreement includes no mention of this 3-month holdback arrangement.
We have determined that we will immediately undo all holdbacks, and pay Finder’s Payment Rewards to the appropriate parties (i.e., group leader or lenders) as loan payments are received.
- We will pay the previously held-back rewards on defaulted loans (even though those amounts have already been distributed to lenders) to all the GLs.
- In case of future default on any of those loans, we will pay the amount of the originally held-back rewards to the lenders on those loans.
We estimate the date of disbursement of these rewards by end of February, 2008.
We want to thank and acknowledge Traveler505 for bringing these errors to our attention. This is an example of how the Prosper community helps us improve the site and our operations on an ongoing basis.
Interest paid on all refunds
Also, because Prosper was clearly in error the application of all of the above payments in question, and our error involves a time delay between when Prosper should have made payments to lenders, Prosper will pay interest at California’s legal rate of 7% on all amounts due to the affected lenders or GLs, from the date the payment should have been made. Interest will be paid in all 3 situations mentioned above.
Again we apologize for these errors and appreciate these matters being brought to our attention.