Color Me Stunned

RateLadder posted late last night that Prosper has been e-mailing lenders regarding their new foray into collections via legal judgments. They have provided a process by which lenders may opt-in to the legal proceedings.

The purpose of this email is to inform you of your right to choose what action you would like to take with regard to the accounts of the legal collection test currently underway.

Of the original 74 loans in the legal test, 68 remain (6 loans have fallen out due to such things as curing or bankruptcy filings). In order to present the strongest case, our law firm believes that it is best for Prosper to be the official owner of the loan when suit is filed. As such, we have developed the following process to accomplish this:

...

You may choose to accept the $33.11 (the “debt sale amount”) for your loans now or to receive a pro-rata share of the net recoveries of this legal test pool. The pro-rata share would be based on the gross amount due on your Notes divided by the gross amount due to all lenders who choose to be in the test, calculated as of January 23, 2008 (the “Pool Commencement Date”), i.e., the date after which lenders must respond to this notification indicate whether they wish to participate in the test on a pro-rata basis. Based on the gross amounts due as of $325.26 if all lenders chose to remain in the test, your share would be 4.4211%.

This has been some time in coming. Doug Fuller has been preaching legal action since he started, and more recently RateLadder posted on the "New Collection Agency" results. This is all solid work, and kudos to Mr. Fuller for shepherding this along.

I also want to send a general kudos to Prosper's management for proactively contacting lenders about their plans. In the past, Prosper has taken more of a forgiveness instead of permission attitude toward their lender interactions. I am heartened to see that they're doing things entirely above board, within their legal framework, and allowing lenders the options to participate in their tests.