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Questions and Answers: Prosper Edition

by Peter Renton on August 22, 2012

Last week on my trip to San Francisco I sat down in the Prosper offices and met with many people on the management team. We covered a range of topics and I brought many of your questions to the table. Here are their responses.

Q. Any movement on new states being approved?

There has been some movement in this area and we will be able to announce one new state coming on board shortly. What we are doing going forward is trying to reengage the state regulators in a broader conversation at a higher level. We made applications to many of the states several years ago and a lot has changed at Prosper since then. We want state regulators to be aware of these changes.

Q. Is there anything individual investors can do to help along this process?

Not really. We need to deal with each state regulator in our own way. Editor’s note: contacting your local NASAA official certainly can’t hurt. Here is a link to the page that lists all the state regulators.

Q. What about opening the secondary market to different states the way Lending Club has done?

We have done some work in this area as well but are not able to make any announcements yet.

Q. In your latest financial statements it looked like you had available cash for another 9-12 months of operations. Are you planning a new funding round soon?

There has been a great deal of interest from the VC community in Prosper from both our existing team of investors and new investors looking to participate in this space. So, while there are no guarantees we are confident that another funding round will be available to us if and when we need it.

Q. What is the status of the bankruptcy remote vehicle Prosper Funding LLC?

We are in a quiet period right now regarding that application so we cannot comment on any progress.

Q. You have a much lower average loan size than Lending Club – any plans to allow larger loans?

Yes. In fact we increased the maximum loan size for B and C grade borrowers to $25,000 (from $15,000) earlier this month. We will continue to evaluate loan size as part of our overall risk management strategy.

Q. You increased the number of 5-year loans available on the platform earlier this year – are you going to be maintaining this higher percentage?

Yes. Our 5-year loans have been performing at better than expectations and we see them as an excellent product for both borrowers and investors.

Q. How have repeat borrowers been performing? It seems that their returns have declined a little this year.

You will remember about a year ago we made an adjustment to the interest rates on many repeat borrower loans so returns for investors are now closer to our expectations.

Q. Your collections process is not transparent at all. Can you provide details about this process?

Certainly. Editor’s note: I sat down at length with Prosper’s collection manager and we went through their collections process in detail. This warranted its own article so it will be shared in a blog post next week.

Q. With Prosper stats on Lendstats still offline there are no options for data analysis for Prosper investors. Are you working to make your data download easier to work with?

As a matter of fact we have some changes in the pipeline that should be released soon that will make analysis of the loan history on Prosper much easier.

 

{ 14 comments… read them below or add one }

DT August 22, 2012 at 9:37 am

Good feedback. Appreciate the information.

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Dan B August 22, 2012 at 1:11 pm

Thanks for the info. Looking forward to your in depth “collections” post.

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Dennis August 22, 2012 at 3:04 pm

Thanks for all your work Peter – you have the best P2P educational/news web site, period. I too am very much looking forward to your post on Prosper collections. I am also relieved to hear that future operational funding for Prosper shouldn’t be a problem, something I’ve read about elsewhere.

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Peter Renton August 22, 2012 at 3:10 pm

Thanks everyone, I appreciate your kind comments.

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Mike Craig August 22, 2012 at 4:48 pm

Thanks for the info update. My readers are interested in alternative income streams and p2p fits right in there. I understand, the situation state by state is very sensitive. Maybe something will be done with Foliofn in the not to distant future for Prosper. There’s always hope.

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Peter Renton August 22, 2012 at 9:51 pm

Mike, I think we will see several major changes with Prosper before the end of the year and one of these maybe Foliofn in more states. We will have to wait and see.

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RayJ August 23, 2012 at 5:40 am

Peter,

Can you try and find out why Prosper doesn’t allow late loans to be sold on FOLIOfn, yet LendingCLub allows this. I have addressed this issue with Prosper and the only information I was supplied with, was that this was the stance Prosper has decided to take.

Any other information would be helpful. I have moved the majority of my money to LendingClub and will continue to pour the majority of my money into LendingClub due to this one option.

I’m sure I can’t be the only person who sees the ability to dispose of late loans as a huge selling point for LendingClub.

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Sean August 23, 2012 at 1:35 pm

Out of curiosity, how often does this help? There’s no historical sales info available on FolioFn, but even deeply discounted late loans don’t seem to move much from what I’ve seen.

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Peter Renton August 23, 2012 at 2:39 pm

I am not sure exactly why Prosper doesn’t allow this, it is something I will bring up again in a future conversation.

As for the difference it makes many investors believe it helps. Personally, I think it is not worth the effort. You can sell a loan that is 1-15 days late for a 10-20% discount but I don’t know anyone who has done a scientific study as to how much this might increase the overall return.

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Knoboudei August 23, 2012 at 3:30 pm

Did Prosper comment on the status or the potential resolution of the CA lawsuit? I would like to invest in Prosper but, I am concerned about the potential business impact of an unfavorable verdict against Prosper.

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Peter Renton August 23, 2012 at 3:57 pm

Yes, we did chat about the lawsuit but unfortunately those comments were off the record so I can’t say anything about it. Suffice it to say that I am continuing to invest new money in Prosper.

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Knoboudei August 24, 2012 at 9:49 pm

Thanks for the response. I think I will take a wait and see approach to investment in Prosper. Hopefully, the lawsuit is resolved soon; one way or the other. I guess I will have to endure my co-worker bragging about his Prosper returns being higher that my LC returns until then but, ~11% over 2.5 years in not bad. Greed is not always good.

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wormdc August 26, 2012 at 1:27 am

I have been investing in prosper for about 4 yrs now but just for fun…. I know that there are “teams” or groups that do analysis and invest toghether to help with the work and get better results… I was looking for any contacts in this direction

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Peter Renton August 26, 2012 at 10:06 am

Yes, there are several groups on Prosper that invest together. I wrote about this in a post last year: http://www.sociallending.net/peer_lending/prosper-groups-put-the-social-in-social-lending/

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