Thursday, November 1, 2007

Prosper Violating Lender Registration Agreement?

traveler505 has done some great research that suggests that Prosper is violating their agreement with lenders. It's a long read (at least by blog standards), but he's got a solid collection of facts backing him up.

Because the Lender Agreement specifically precludes Prosper from deducting Servicing Fees and Group Leader Fees from payments made more than 30 days after the due date, and because doing so constitutes a breach of contract and breach of fiduciary duty on the part of Prosper Marketplace Inc., I request that Prosper make immediate restitution of the misappropriated funds to lender accounts.

traveler505 was one of many lenders who are highly critical of Prosper's recent changes, specifically hiding previous listings. The changes destroyed some of good will from the lending community, and traveler505 is no longer being nice.

In the past, when my research uncovered serious misconduct by Prosper, I have contacted Prosper staff privately, to allow them to voluntarily correct the problem before making it public. However, in view of the gross contempt that Prosper has shown for lenders through the moderation of these forums and the implementation of certain new policies, I no longer feel that I owe Prosper this courtesy. I will be delivering a formal version of this complaint and request for restitution to Prosper’s General Counsel and Chief Compliance Officer later this week, after lenders have had an opportunity to review it here.

Prosper Andrew has committed to look into it:

Thanks for bringing this up. We'll look into it and make changes accordingly (either to the agreement or to the servicing system).

He was quickly called on the implied statement that everything would be hunky dory if they changed the agreement and clarified his answer:

Sorry - I didn't mean to imply that we would simply change the agreement and pretend like nothing ever happened. Give us a couple of days to work on this and come up with a plan.

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