Sunday, November 18, 2007

Prosper Adding To Collections Effort

RateLadder beat me to this (that'll teach me to being Thanksgiving sloth-hood early), but you're missing the rest of the story.

Mr Deluxe posted to the forums that while late on his loan, he had received a letter from Prosper:

OK- I will tell. My loan was recently under 30 days late (now current) I received several emails from Prosper, but the letter I got in today’s mail was very effective.

It was a letter from Prosper reminding me that 155 people contributed to my loan and they are not ‘big banks’ or ‘Warren Buffett’. The letter went on to say that lenders are people too, with jobs, families, bills, etc. and asked ‘how do you think they feel now that you are late.'

It was very well written and should open the eyes of borrowers that intentionally are late or default.

However, this has been a topic of conversation ever since Doug Fuller had come onto the scene. Lend2 had written a good summary of his group's borrowers' experience with collections. He took a more individual approach toward convincing borrowers that they were hurting real people:

However, it was an important lesson for me to realize that many of these people really do want to make good on their loans. Many are hard-working, good people like you and me, who have simply been backed into a corner by unfortunate circumstances.

The Prosper TOS says we can't aggressively try to collect on these loans. But there's nothing that says we can't make friends with a few late borrowers. So why not reach out to a few late borrowers and introduce yourself? Tell them about your work, family, etc. and show that you are a real person. Explain why you loan money on Prosper. Offer to answer questions about Prosper and remind them about the points I mentioned above (i.e. ability to make a small payment directly through the Prosper site, most of which will flow through to the lenders).

In addition, this off-line contact before handing over to collections was mentioned by Doug Fuller when he came on board (and answered some questions).

2. When you talk about transparency, how transparent are you willing to go? When will the collections process be more transparent? How will we know when the collections process is more transparent? (This is not a trick question, or a joke. While your stated goal is to make collections more transparent, what I've seen in my nine months as a lender has been a move away from transparency. Will you or Prosper post changes in collection procedures, and what they mean in terms of lenders' bottom lines?)

Here are the things I am working on right now:

A. Increased agency oversight – I have already visited both locations of PennCro and have implemented a bi-monthly strategy call. I’m expecting an increase in collections simply from the increased focus on our current agency.
B. I plan to implement a “pilot” legal program during the month of October (meaning first law suits should be filed in November).
C. I am looking to augment current phone channel collection efforts with some off-line collection letters.
D. I have been interviewing agencies as potential replacements to our current agencies, focusing on smaller agencies that I believe will give us more attention.
E. I am evaluating the pros and cons of bringing the collections activities in house. I expect to reach a decision on this by the end of November.

16. What's Doug Fuller going to do about collections at Prosper? As far as I can tell, these are the items (after sifting through the hyperbole etc): widen the time span of collection calls, stop calling disconnected numbers, call more often, tell callers they're hurting "average Joes", scare late borrowers with lawsuits, find a different collection agency or bring the operation in-house if the above items aren't accomplished.

That’s a pretty good summary of my plan.

The letters have been a long time coming and will hopefully be useful in improving Prosper's collections. And that ... is the rest of the story.

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