Comments on: Prosper and Loanio Updates

By: Joseph

Joseph — Thu, 04 Dec 2008 18:04:58 +0000

Basically – people helping people to get out from under the megacredit machine. The machine saw that their business would crumble if people could escape their serfdom – so they moved in to shut it down.

By: Tight Fisted Miser

Tight Fisted Miser — Wed, 03 Dec 2008 18:37:14 +0000

It should have been obvious to Prosper that their loans could be classified as securities. I’m still in law school and I could see that. I’m wondering where they got their legal advice from.

By: Michele

Michele — Wed, 03 Dec 2008 18:35:20 +0000

I have had two loans from Prosper. The first loan I got (for the minimum amount) I had to jump through all sorts of hoops to prove identity, income, etc. They made me show Drivers license (and for some strange reason, would not accept a passport as proof of identity), had to verify my bank, credit report and I had to show a current pay stub, they actually called my workplace to verify employment and they called my home to verify that I was an actual living, breathing person, all this before the loan go forward.

By: Lazy Man

Lazy Man — Wed, 03 Dec 2008 18:34:46 +0000

Hmmm, I specifically remember from Prosper Days that Prosper does verify some employment and income. I’m also not sure what happens if I walk into a bank and lie about the purpose of my personal loan.

As for selling securities we already knew that Prosper wasn’t registered for doing so. This is why they’ve applied with the SEC and went into a quiet period weeks ago. I don’t see the reason for this new cease and desist unless it’s just the SEC pushing the normal paperwork in cases like this. In that case, I’m sorry for mentioning it, because then it’s really not anything new.

By: Mr. ToughMoneyLove

Mr. ToughMoneyLove — Wed, 03 Dec 2008 18:31:07 +0000

Lazy Man – The SEC determined that Prosper’s lender participation notes were actually unregistered securities which is a huge legal no-no. Prosper belatedly sought and received some competent legal advice following which it agreed with the SEC. They consented to stop offering the notes, meaning that its business model will have to be substantially reworked.

By: Carol

Carol — Wed, 03 Dec 2008 18:13:44 +0000

Looks to me like the complaint is that Prosper is “selling” the loans to people who are “expecting to make a profit,” but Prosper does not verify the borrowers’ employment or income, or provide any means of recourse if a borrower lies about the purpose of their loan. This qualifies as selling securities, and Prosper is not appropriately registered to do so.

At least, that’s what I got from it…

By: Michele

Michele — Wed, 03 Dec 2008 14:13:58 +0000

I wouldn’t doubt that some banking/mortgage lobby is behind the action on this. The powers that be should clean their own house instead of going on a witch hunt.