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A Note from our President, Aaron Vermut, as Prosper Looks to the Future

by Prosper on 03/30/13

It’s been a little over two months since CEO, Steve Vermut and Head of Global Institutional Sales, Ron Suber, joined Prosper’s management team, and this week, I am excited to be joining them full time as President. I wanted to let our community know that we intend to use this blog as a method of communication to continuously inform both our borrowers and lenders of what we are working on here at Prosper, and of what new and exciting things are coming in the near future. It’s important to all of us that our customers understand we are striving to make Prosper a leader in customer service and technology. With valuable feedback from our customers, we are able to deliver products and solutions that will enhance the user experience across the platform.

I want to give everyone an idea of all the exciting things the Prosper team has been working on since bringing on the new management team. In February, we focused on building and launching tools and improvements vital to the platform’s performance. Our new API gives lenders the tools they need to customize their Prosper experience in ways never before possible, and Prosper Funding LLC provides increased security and protection for our lenders. We also extended our customer service hours to provide more one-on-one support for more hours of the day.

As we come to the end of March, we’re excited to report $15.1 million in loan originations, a 60% growth over February and our best month since October. We also project $25 million in new loan listings on the platform this month. In fact, at the time of this post, there are 200 new loans now available to lenders.

We have also been looking at various ways to improve our service and product offerings for our retail and institutional lenders, as well as for our borrowers. Here are some of the priority items that we’re focusing on over the next few months (in no particular order):

•   New Prosper Logo/Identity: Along with the technology enhancements to our product, on April 2nd we are launching a rebranded web experience including a new logo and identity. We have been working on this for a while and are excited about the changes. Let us know what you think.

•   Improved collectionsOver the past several months, we have focused on improving collections by increasing call intensity, and working with our delinquent borrowers to be the payment of choice during tax refund season. As a result of these changes, we have had 3 consecutive record months of collections. Moving forward, we will be adding a new collections agency and will send delinquent accounts to collections at 16 days past due rather than 31 days past due. This will enable us to expand our call coverage and skip tracing capabilities, which will provide better results for our lenders.

•   Washington State (and more)We are currently engaged in communication with the Security Division of Washington’s Department of Finance and hope to reopen the platform to Washington lenders very soon. We apologize for the inconvenience to our Washington customers – the blackout is a result of the implementation of Prosper Funding LLC’s New Note Offering. With this implementation, we have also added West Virginia and Michigan, and plan to have several additional states join the platform in the near future.

•   Whole LoansIn April we are launching a whole loan product in beta for our institutional lenders, which will be separate from our traditional pool of fractional loans. The beta version of this product is in test mode and we will communicate more details as they develop.

•   Additional ImprovementsSome of the many other things we are working on are a new IRA trading option on Foliofn, an increase in the loan cap on the platform to $35,000, enhancements to our Automated Quick Invest tool (AQI), and expansion to both our customer support and technology teams.

Steve, Ron and I are committed to creating a transparent relationship with our borrower and lender communities. This asset class and market place are changing rapidly. We will continue to make ourselves available to answer any questions. Please check back here regularly as I publish new posts with updates as well as gather questions and feedback from our community at large. We welcome any comments and/or questions below.

Thank you,

Aaron Vermut
President


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54 Responses


Alan Boisvert | March 30th, 2013 at 5:25 pm

I have had 4 previous loans through Prosper and am a lender as well. My credit score is 862 (?) according to Prosper, but I was unable to get a $6,000, 1 year loan, because my information didn’t jive with whatever they are looking at. I’ve been wondering why their loan volume has been decreasing the last few months and now I think I know. They seemed to have improved their automation but lost contact with their business. I will be withdrawing funds from here on out, instead of adding to the lender base.


Eric Traboulay | March 30th, 2013 at 5:57 pm

Hello, It would be good to update the notes trading platform API so that users can sell more than ten notes at a time. It also doesn’t save the search criteria when searching for notes to sell. It is also a pain to click on fixed price down the entire page when selling notes. There should be a select all.
Thanks,
Eric


Tim Turner | March 30th, 2013 at 6:54 pm

What about North Carolina?


Chris Lostrom | March 30th, 2013 at 10:02 pm

Very excited to hear about the positive changes, especially about the improved focus on collections!


Jeff Kerwin | March 31st, 2013 at 6:29 am

I’m a long-time lender who has just moved from Washington DC to Marlyand. All of a sudden I cannot make loans anymore because Prosper doesn’t take loans from people residing in Maryland. Please tell me this will be corrected soon. Prosper has been good to me. I would hate to leave it.


Imusthavebumpedmyhead | April 1st, 2013 at 5:58 am

Will your whole loan program take away loans from the retail side or put more risky and less desirable loans toward retail investors? Please explain in detail what loans you will be taking out of the retail pool and how this effects your current retail investors.


Tek Lentine | April 2nd, 2013 at 2:14 am

I would love to increase my stake in Prosper, but your cash flow problems are very disconcerting to me even with the formation of Prosper Funding LLC. Your expenses are far too high and your loan origination growth is topping out. Your average employee (not including the top six executives) makes over $130,000 per year, yet you don’t have enough gross profit to cover payroll alone.

What are you going to do to decrease expenses and make the company profitable?


Sean Turner | April 2nd, 2013 at 11:41 am

I love all of the above. As a WA investor its been extremely disconcerting accumulating cash and not being able to reinvest it. I’m afraid I’ve had to resort to investing in Lending Club instead in the mean time (ewwww yuck). Sadly their information about their loans, loan descriptions, and information about projected default rates etc are all vastly inferior and I resorted to only buying existing loans from them so I could have enough confidence about the loan performance. As soon as you get WA restored I’ll be drawing down that account asap and getting a ROTH IRA initiated here until I cap out my investor suitability cap.

I started a new institutional account a few months ago and am very appreciative of it, since it gives me a great return on a very stable base for my LLC funds for my real estate etc, but in my opinion let the Institutional investors stand in equal footing with the individual investors. Its not THAT hard to push the button to fully fund the remaining balance of the pending loan if you want to buy the whole thing. I love that as a small institutional investor with only about $15,000 to invest with in my LLC I have a way to grow my renovation budget for my real estate safely, but this site is about power to the people. The big dogs may be able to buy up a whole loan, but unless you want to loosen your lending criteria and let the institutional guys play for those more marginal loans, lets keep this a fair fight.


TM | April 2nd, 2013 at 12:13 pm

Moving the data from loans listed in terms of lenders bidding is a bad move. Also I read above the increase in collections, yet I have YET to ever get a penny from collections. This is on nearly 70 loans that have fallen into a collections status. That is hardly working hard on it. I have begun (month ago) pulling all my funds out of Prosper. This platform has gotten much worse than when I started.


Aaron Vermut | April 2nd, 2013 at 5:25 pm

Tek – While I’ve only been here a little while, I agree with some of your assertion but not all. We plan to run this company much more conservatively than it has been in the past. The new management team has a history of running lean profitable businesses. We intend to take Prosper to profitability by working with more investors. growing originations and watching expenses. By the way, originations grew over 60% in March to $15.1mm and April is looking even better (contrary to your assertion that our growth is topping out).

As for average salaries, we need a certain amount of talented, educated people to run this highly complex business and we don’t feel that our employees are overpaid.

I hope you continue to invest with us.

–A


Aaron Vermut | April 2nd, 2013 at 5:28 pm

Jeff – I will be writing a comprehensive blog post detailing the status of each state. Much of this is still in the hands of the regulators and not Prosper – but we are continuing to try to work with those states where we are not yet approved.

–A


Aaron Vermut | April 2nd, 2013 at 5:54 pm

Eric – I think you are referring to the secondary note trading functionality that is offered by Foliofn. Foliofn is an independent broker dealer that trades the notes for Prosper clients and we don’t have any control over that platform. I will, however, pass your feedback along to them.

–A


Aaron Vermut | April 2nd, 2013 at 5:56 pm

I just posted this on the Prosper.com Facebook page but thought I’d add it here as well to answer your question:

For those of you with questions about our new whole loans product, we will be posting a more thorough update after the completion of the beta period.

What we can tell you now in order to answer your questions is that these loans will be randomly selected and distributed in the whole loans pool for 1 hour only. We don’t anticipate this to crowd out our individual, retail investors or to change the risk profile of loans available across the platform. Additionally, we are simultaneously ramping up volume in order to provide more than enough loans for both pools.


Sean Turner | April 3rd, 2013 at 10:35 am

Although from what I’ve seen of your origination rates from past years Jan and Feb are seasonally weak periods for originations if you’re looking at a MoM time frame. The YoY numbers would be better metrics IMO. That big surge at the end of the year for Christmas was a beautiful thing to behold, but seemed to chill out more after the binge of credit.


icanhasloanz | April 3rd, 2013 at 1:08 pm

Aaron, I am very concerned that Prosper is heading in the direction of “let institutional investors have first pick at quality loans, and give retail investors the leftovers.” While you’re running your beta, I want you to keep this in mind: 1 hour is an eternity for an institutional investor to snap up all the loans that they want. We’ve seen it before — they only need a few minutes because it’s all automated. Even if it’s “randomly selected”, what percent of the total loans will be randomly selected to this pool? 50% 70%? How many of the loans end up being leftovers for the retail investor? With that said, I really appreciate the transparency, and I hope you can address these issues. I understand that institutional investors do need to offload a lot of money, and doing so without alienating retail investors is very difficult, but I think separate pools is a step in the wrong direction. There should be a single system — a level playing field. If everyone uses quickinvest (or another system) for coordinating automated investments, large automated investment maximums can be broken up into multiple small chunks of say $100. The system can do an iterative roundrobin strategy to distribute the small investment chunks amongst interested investors until everyone’s investment amount reaches their max — that way everyone gets a chunk and large investors also get to reach their investment goals.


Jake Larsen | April 3rd, 2013 at 1:53 pm

I would love to see Prosper experiment with secured lending. For instance, what about launching a pilot initiative for auto-loans backed by vehicle titles? It seems that secure loans would be able to attract move conservative capital while at the same time allow you to continue to grow your originations.


Thomas Brandenburger | April 3rd, 2013 at 5:10 pm

I have been a several year lurker. A small investor and credit scoring expert. I have used your data (which is superior) to teach analytics classes as it is quite robust. However as an investor I have chosen your competitor and am advising a couple institutional lenders to do the same for now. You have cleared many hurdles in the last couple months including I might say this communication bringing transparency. One concern for the conservative institutions is bankruptcy. You have created a bankruptcy remote solution but there’s still the hanging cloud of a class action lawsuit dating back a couple years. Is there a timeline to resolution in that lawsuit or has it been resolved and I just didn’t read the quarterly reports closely enough?


Preston Lembke | April 4th, 2013 at 8:25 am

I would also like to increase my stake with Prosper as I have had exciting success with lending on this site, but the cash flow issue is definitely disconcerting and I have haulted further investment until the Q4 2012 report has been released. I need to see the cash flow issue improve. I hope it will soon!


Order23 | April 4th, 2013 at 2:29 pm

With regard to the whole loan, why change ? What I see (or used to see!) was institutional lenders would make a large contribution, but still leave the loan open for retail investors. Why do feel the need to change this ?
Sorry, but I preferred the old logo. The new one looks too much like a smiley face with it’s tongue sticking out.
Also, I used to be able to see who had invested what, which gave me additional data about whether to invest in a loan. This is no longer available.


Aaron Vermut | April 4th, 2013 at 4:28 pm

First of all, let me state that we are committed to servicing both retail and institutional investors equally. I think it’s pretty clear that retail lenders alone cannot get Prosper to profitability. The question is, how do we keep the retail investors happy while simultaneously meeting the needs of institutions so we can grow? There are institutional lenders that, for legal and/or strategic reasons can only purchase whole loans. Additionally, if we put everyone in the same pool, the institutional investors with their greater resources can develop technology to grab the attractive loans before the retail investors have time to even look at the listings. This is not a “level playing field”.

The best solution to meet everyone’s needs is to have two separate pools. In the fractional pool, we will be limiting anyone from purchasing more than 75% of a single loan thereby ensuring that retail investors can get a crack at the desirable loans rather than watching them get snapped up by large investors using the API. The whole loans pool, as said, will be listed a little earlier, the whole loan buyers can purchase what they need, and then an hour later the rest go back to the fractional pool. There is no favoritism between each pool. Loans are randomly selected.

As I have mentioned above, we are testing the whole loan
program in “beta” right now and hope to be able to officially launch it soon. We will continue to monitor and test and if there are unforeseen consequences that make this strategy inherently unfair to one group or another, we will iterate and improve. Keep the good constructive posts coming!


JM | April 4th, 2013 at 8:42 pm

” Moving forward, we will be adding a new collections agency and will send delinquent
accounts to collections at 16 days past due rather than 31 days past
due.”

How did you decide on what new collection agency to use? Was a formal RFP issued? Or was another “recommendation” made for the contracted agency. So far I’ve in 5 years and multiple agencies I’ve seen no real positive results on delinquent accounts. Also sending accounts to collections sooner may not help the bottom line as many debtors will pay within this time frame from your internal efforts, and now you are just giving away free commsion to your agency. I am a collection expert, work for an agency, and a charter member/lender with Prosper. Ive offered to assist for free in the past on deaf ears.


Bob Nelson | April 5th, 2013 at 6:45 am

Dear Mr. Vermut,
I am sorry to see the inclusion of whole loans. We used to be able to interact with borrowers and clarify obscure data or even encourage them to not over-extend themselves. In other words we treated them as we would be treated. Then came the end of bidding and also the end of interactions. Now many borrowers don’t even enter any information about themselves probably considering, rightly, that an automated system doesn’t care about their comments only their metrics. I will continue reinvesting my $7k in Prosper but to call it a peer-to-peer lending structure seems more of a feel-good thing than a reality.

I am glad to see you making improvements in both screening and collections. Be careful though to keep yourself in that special middle ground between the institutions that deny access to those who need help and the institutions who welcome them and then abuse them. In peer to peer lending, the them is us.


Aaron Vermut | April 5th, 2013 at 7:04 am

Sean – loan originations have more to do with what the company does on the marketing side than with seasonality. We are taking a measured approach to ramping up our marketing to bring more borrowers on the platform. Keep watching the numbers and you’ll see what I am talking about!


DHarvey2000 | April 5th, 2013 at 9:32 am

I understand Prosper doesn’t file proof of claims for borrowers who file for bankruptcy. Will this change?


investor-mike | April 5th, 2013 at 11:34 am

First, I just wanted to thank Aaron for making himself available here, and I also appreciate his straight-forward and frank answers. In this blog, I was happiest to see Prosper focus on its customer service. I’m a “medium-sized” personal investor over at Lending Club, but after getting an inside peak at their operations through a service issue, I was disgusted with Lending Club and decided to start trying Prosper as a better alternative. My account here is small now, but I hope to grow it over time (the cash flow issues concerned me, but the LLC is helping with that and is actually protection Lending Club doesn’t have).

From personal experience, Lending Club does so many things on their platform that made it clear they don’t care about their investors, so I see customer service for lenders as an advantage for Propser to explore. Plus, having quality customer service (that doesn’t just send canned answers) would probably result in better payment performance from borrowers… inept customer service could cause an irate borrower to become “stubborn.”

I don’t think we as investors generally ask for much more than a fair system, accurate accounting, and having our interests protected. Simply do that, and you have an advantage that will be seen over time. Just like social network sites, I think social lending can be just as fickle and traffic can quickly shift to the better platform.


investor-mike | April 5th, 2013 at 12:01 pm

In all fairness, that 60% number was the only thing that hit me as a little un-straightforward, even though it’s true. I think the performance since Feb is the result of the LLC formation providing some protection to investors… the result of bottled up supply, and it’s only statistically valid if included with the dismal Nov and Dec origination numbers.

Nonetheless, bottled up or not, growth like that is always a good thing and I think it shows that Prosper is setting the stage for growth from here. That effort is what separates companies from certain failure from companies that have a real chance. So please just keep being honest with us – many of us get the situation and the only thing that’d cause us to run is the fishy feeling of being handled.


Aaron Vermut | April 5th, 2013 at 1:40 pm

I hear you loud and clear. Collections IS a fine line and we want to be firm but fair while remembering who the “us” is.


Aaron Vermut | April 5th, 2013 at 1:41 pm

Your wish is our command. Welcome back – Washington is back online.


Aaron Vermut | April 5th, 2013 at 1:51 pm

Wow – I am super impressed and energized with the quality of the comments and debate on this blog. Thank you to everyone that has contributed.

Now let me try to answer the question: Bob, no, I do not think anything I said in my response above was insulting to anyone. That said, I also appreciate your feelings on the subject. But I do not think we are acting in a duplicitous manner. Prosper is a valuable resource to many and it is my job to make sure that it is around for a long time. Check out some of the other posts on this blog, there is sincere concern over the fact that Prosper still doesn’t make money. Ideas must evolve. The original idea and implementation was incredible and that is why I am here doing this. I have a huge amount of respect for the team that came up with the idea and built this company. The entire Prosper team now wants to take that idea and create a profitable enterprise our of it.

Everything that we are doing we are being transparent about. We want all investors to co-exist. If you want to buy whole loans, the whole loan pool is public – go nuts. If you want to buy fractional loans, that is also public and you have the same tools and information as anyone else to fund those loans. It is my goal to create a transparent and fair exchange for the lenders. Can you realistically argue with that?


Aaron Vermut | April 5th, 2013 at 1:55 pm

Thomas – it pains me to say this, but since the lawsuit is ongoing, I am not permitted to comment on it.


Randal LaBine | April 5th, 2013 at 4:35 pm

Bob, your comment is not realistic. The P2P industry needs institutions to survive because that’s the only way to attract the necessary loan volume. You are essentially asking Prosper to go out of business on principle — and then neither institutions or retail investors would have the opportunity to invest.

For the record, I’m a retail investor and have been happy with the loans available to me as well as the returns. Keep up the good work Aaron.


Tek Lentine | April 7th, 2013 at 7:09 pm

Order23:

The answer to your question is glaringly obvious in Prosper’s financial statements. In 2012, Prosper showed a 16.1M net loss from operating activities. Their current cash balance when allowing for the $20M recent investment by Sequoia Capital stands at around $20.6M. Basically, if some radical strategy is not implemented to accelerate loan origination growth, Prosper will be out of business by the end of 2014 (barring another cash injection from an outside investor).

I don’t need to tell you that this would spell trouble for Prosper investors. Mr. Vermut has the daunting task of taking a company with a failing business model and making it profitable within 21 months! I think I would have declined that job offer. Hats off to his ambition.

I think that it is obvious individual investors such as you and I cannot make this company profitable. There just isn’t enough of us. However, loan funding stands at around 50% which means there are a lot of approved borrowers that are not getting funded. The key to keeping Prosper afloat is to grow both the borrower base further, and to take immediate advantage of the unfunded loans by finding lenders to fund them.

I applaud Mr Vermut’s business savvy. He is doing what he needs to keep Prosper available for us to invest in, and from his words, it sounds like he is doing it in a way that will minimize the impact on individual investors.

I welcome the whole loan program and would challenge skeptics to present their own ideas for how Prosper can grow its way to profitability. Here’s your chance… it appears that the CEO is reading these comments closely.


Tek Lentine | April 7th, 2013 at 7:24 pm

Mr. Brandenburger:

Have you looked at Lending Club’s financial statements? Lending Club does have more cash on hand than Prosper (52.4M on Sep 30, 2012) but they also have negative annual cash flows of millions of dollars. Seeing as they offer no real differentiation from Prosper’s business model, I don’t see why you would advise your client’s to invest in either enterprise over the other.

By the way, the class action law suit against Prosper is desperate on the part of the Plaintiffs. They are disorganized and grasping for money that doesn’t belong to them in first place. Prosper has not settled out of court because they know that any judge with half a mind is going to rule in Prosper’s favor when the time comes.


John J Radford | April 8th, 2013 at 11:00 am

I think on reflection, most individual non-institutional investors will take a wait and see approach. If Prosper continues to provide sufficient high quality loans then individual investors will continue to invest. If opportunities are not forthcoming, investors will begin to systematically withdraw funds for other opportunities. I think it would be wise on the part of Prosper to think through the impacts of various changes to macro economic conditions that might affect the ability of Prosper to attract and retain their individual investor base.


AD | April 8th, 2013 at 7:18 pm

Tek: There are a lot of reasons why a listing doesn’t result in a loan. For the past couple months investor demand appears to have very little to do with it. 62% of the listings in March ultimately funded. Of the 38% unfunded listings only 2% did not fund because their listing expired (due to not reaching funding threshholds) or got withdrawn after 5 days. These numbers are a huge improvement vs. last year (where most months were at 10% expired, but hit a peak during Nov/Dec at 28%) and I don’t believe should be called out as an area of concern. To me this indicates that investor demand outpaces borrower demand (at least at the current listing levels). This month, we are finally seeing increased listing volume (40% higher than March), if investor demand keeps pace, Prosper may be @ $20MM for April.

I agree, Aaron has a major undertaking, but a lot of the pieces seem to be coming together. If they can scale, and gain some cost efficiencies (especially on the acquisition cost end) their balance sheet will be in a good place 12 months from now.


Thomas Brandenburger | April 9th, 2013 at 10:34 am

Thanks.


Aaron Vermut | April 11th, 2013 at 10:48 am

Thomas- I would like to clear up what I think is a common misconception around Prosper’s quiet period in 2008. We voluntarily shut down during the registration with the SEC, as did Lending Club. The US Federal Government did not shut Prosper down. Additionally, the bankruptcy remote offering is not connected to the lawsuit. It was driven by a desire to enhance our product offering to our investors, as we hope to do more and more of moving forward.


Scrapper | April 12th, 2013 at 2:24 pm

It looks like Prosper stopped issuing 1-year notes. Is that part of how you’re looking to the future – quit offering products that people want.


Thomas Brandenburger | April 13th, 2013 at 10:24 pm

I look forward to the lawsuit being resolved and continue to believe that Prosper has the superior lending platform both technically and in terms of returns. Best of luck and the new bookings look exciting!


Aaron Vermut | April 15th, 2013 at 2:08 pm

Actually, we quit offering them because very few borrowers wanted them.


Kevin Gaymon | April 16th, 2013 at 6:56 am

also being able to sort by original note amount would great when purchasing loans.


Joe Keller | April 19th, 2013 at 11:56 am

I am going to put my two cents out here. if prosper starts to offer services only to the lenders who have lots of money i will leave. p2p is about being fair. the little guy can lend to the little guy! if the big guys want to lend to the little guys let them use a bank or the bond market! prosper you are ridiculous if you lose sight of this goal! soon it will be i2p and that is not p2p. i want person to person, not institution to person! get rid of the institutional investors and get rid of any employee making more than 50 thousand a year. anyone who is making over 50k a year is not my peer. maybe some one should start the real p2p lending site! if i ever find a better p2p lending site i will move there. or if you give instutional investors different selection of services to choose from i will leave.


Tek Lentine | April 20th, 2013 at 5:10 am

Lending Club currently shows nearly a $1M monthly loss from operating activities. Any positive cash flow would be from investing activities, and we all know the disclaimer, “Past performance may not be indicative of future results.” I would not classify that as a solid cash position.


Scott Hirleman | April 21st, 2013 at 1:19 pm

Insulting != factual; it is clear that lending volume through P2P just isn’t high enough to get them to profitability. That is because the cost to acquire retail investors and the loan volume each individual can support just cannot lead to a successful company at the scale Prosper is looking for. It is simple economics. That said, the viral effect of retail investors is important for the business and it is important as they can run better metrics against a wider pool of lenders. As Randal says, only on principle is a terrible way to run your business (I was going to make a principle / principal pun but will refrain)


Scott Hirleman | April 21st, 2013 at 1:23 pm

Correction: cash flow positive, not profitable. GAAP has nothing to do with actual economic reality.


Ashley Matt | May 7th, 2013 at 5:26 am

As a lender, I am not happy that Prosper has done away with 1-year loans. Those loans are a special category for borrowers who want to consolidate debt quickly and lenders who want lower risk loans. They were the main reason I chose Prosper over Lending Club. One-year loans made up almost my entire portfolio, and now, seeing that there is no move to return them, it looks like I will be taking my business elsewhere.


Peter Vicario | May 10th, 2013 at 9:12 am

The new site looks nice. Although I like the old appearance too. One thing I would love to see on any future versions, would be the ability to toggle between my two accounts. Currently, I have regular account and an IRA account, and it is kind of dumb that I have to have two log-ins with two different e-mail addresses. Every other investment company would allow me to have one log-in and then the ability to toggle between my accounts within that log-in. My IRA is currently my ROTH IRA, but I would love to open a third account with my Traditional IRA if this feature was added.


Aaron Vermut | May 10th, 2013 at 9:27 am

Ashley – I appreciate your sentiment. The real issue was that the 1-year loans were not attractive to borrowers. Payments with principal and interest ended up pretty high relative to three and five year loans and the take rate was extremely low. Its just a matter of no demand.


Eric | May 28th, 2013 at 9:18 am

Wow, lots of discussion going on there. I personally do not have a hard time finding a quality loans to invest in on a given month, but if “institutional lenders” are getting “first dibbs” on loans before it hits the marketplace, then I am just as angry as you are. That is only not fair to the people who have given prosper its success, but its not fairly passing around the risk if institutional lenders are purview to additional information and cherry picking the loans! I too dislike the direction of prosper, in getting away from the original peer to peer concept. We used to be able to ask questions on the loans, see the aliases of who is investing, but not anymore. A question I would pose to Mr. vermut is about this very idea, and whether institutional lenders are allowed to ask questions on their loans? A simple yes or no will suffice.


Eric | May 28th, 2013 at 9:20 am

Yes, but everybody deserves transparency; whether institutional or retail. Bob does have a point.


Eric | May 28th, 2013 at 9:31 am

That is just unrealistic on all merits. That is why they pay Mr. Vermut and the staff at prosper big money to make this work for everybody. I hate several things they have done, but my experience has not been severely trampled on with the inclusion of institutional investors. They have to work with all income brackets, and various investment strategies and have to please everybody. just let them do their job, they’ll make P2P work.


Eric | May 28th, 2013 at 9:34 am

Wouldn’t that require a whole new department, and more overpaid workers? The whole idea here is how is prosper going to cut waste, and become profitable. It might be more trouble than its worth, plus the lender yields would mostly not be double digit by being secured. It might be a complete bust.


Eric | May 28th, 2013 at 9:45 am

That’s a scary note Tek, thanks for the update. I remember reading on this some time ago, and couldn’t quite understand how this business model could take a loss-perhaps its payroll issues as you indicate. Im also glad to see prosper step back from “lender promotions”, which I always didn’t care to see and would rather have a solvent prosper and no promotions.


ProsperLoans | June 30th, 2013 at 3:44 pm

Hi Donald- Thanks for your observations. Aaron stated in this blog that we eliminated one year loans due to a lack of borrower demand. That was and remains true. One year loans, because borrowers are paying off principal and interest every month, have higher monthly payments than three and five year loans. The resulting high payment correlated directly into a very low demand from borrowers versus the three and five year loans. It may seem counter intuitive but one year loan demand is not related to early repayment at all. Borrowers are looking for loans that are manageable on a month to month basis. Sometimes people do pay off early, it’s a great thing for the borrowers to do that but it does represent a risk to investors who then have to go out and find new loans to replace them.

As for the Whole Loan program, we understand your concerns, but want you to know that there are several controls in place that allow both types of investors to participate equally. Loans that are funneled into the whole loan pool are randomly selected without favoritism. Those randomly selected loans will only remain in the whole loan pool for a brief period of 1 hour before they will funnel directly into the standard loan pool. Additionally, we are lowering the maximum bid in the standard loan pool from 75% to 50% to allow our retail investor population more opportunity to invest. We are very pleased with the success so far of the Whole Loan product, and feel that it will help us successfully maintain balance on the platform.

Lastly, you asked about the verification process. For each borrower, we conduct a thorough and rigorous verification process internally to validate identity and income and as a result, we have very few cases of fraud. As part of our process, we do our best to provide lenders with insight into the risk each borrower presents. Because there is an element of risk that is present with this (and any) kind of investment, we also advise our investors to diversify as much as possible. For more information about diversification or investment tips please feel free to contact our investment team at investorteam@prosper.com.


posted in Borrowers,Featured,Lenders,Prosper News 54 comments »

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Notice: Blogs and other materials posted on or linked from this page that use the name "Prosper" generally use that name to refer to Prosper Marketplace, Inc. if published before January 31, 2013 and to refer to Prosper Funding LLC if published on or after February 1, 2013.