4/29/2007

Live Long and "Prosper"

"Prosper, America's first people-to-people lending marketplace, was created to make consumer lending more financially and socially rewarding for everyone.

The way Prosper works is intuitive to people who have used eBay. Instead of listing and bidding on items, people list and bid on loans using Prosper's online auction platform.

People who want to lend set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. People who lend can easily diversify using "standing orders", which automatically make many small loans to different borrowers.

In addition to criteria commonly used by institutional lenders, such as credit scores, people who lend can consider borrowers' group affiliations. Groups on Prosper are critical to bringing people together for the common goal of borrowing at better rates. Groups earn reputations according to their members' repayment records. Groups with successful repayment histories should attract more lenders offering lower rates.

Borrowers create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. Then the auction begins as people who lend bid down the interest rate. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrower and lenders.

Prosper's rigid privacy policy reflects co-founder and Chief Executive Officer Chris Larsen's longstanding history as an advocate of stringent consumer financial privacy protection laws and practices. Prosper does not sell, rent, or share members' personal information with third party marketers. Prosper members are in control of how much personal information—if any—is revealed on the website and with other members. Prosper's security and identity verification systems are state of the art, and consistent with those used by banks, brokerages and institutional creditors.

Prosper generates revenue by collecting a one-time 1% or 2% fee on funded loans from borrowers, and assessing a 0.5% or 1.0% annual loan servicing fee to lenders. Backed by Accel Partners, Benchmark Capital, Fidelity Ventures, and Omidyar Network, Prosper has raised approximately $20 million. Prosper's marketplace platform is patent pending."


So when Casey Serin talks about a strange $8k loan to a stranger in Dallas, I tend to think that this was the vehicle. Conversely, are some of Prosper's various lenders facilitating the shell corp, cash-back schemes, or penny stock debacle?

8 comments:

Schnapps said...

I must have missed something. Or forgotten it in the Casey Saga.

So did he loan $8K to someone in Dallas?

That whole Prosper thing sounds vaguely sketchy to me, but I can't put my finger on why.

Aspeth said...

It's in his google spreadsheet, and he addressed it, briefly, a couple of times in his blog. It's ironic, because the 8k seems to have gone to a deadbeat borrower, who's dodging him.

Ah, karma, you evil bitch.

Schnapps said...

I dunno if that's karma. It sounds like stupidity to me.

:)

(yes, I'm feeling a bit bitchy today :))

Aspeth said...

Ah, I don't think that's so bitchy. Casey Serin does specialize in stupidity.

Hey, there's a tagline for him!

"Hi, I'm Casey Serin, and I specialize in stupidity."

Schnapps said...

::snerk::

Too funny :> You should be glad I swallowed my Coke Zero before I looked at that or you'd owe me a new laptop :>

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Sprezzatura said...

I recall Casey saying something about having loaned money to "a friend" who never paid it back, but I don't recall if it was a local friend or not.

It's possible he's hit Prosper, but don't they make you use real names there? If so, he'd be pegged for a looser pretty fast.

Sprezzatura said...

Forgot to add -- at one point I thought about putting a bit of cash into Prosper, but it seems to me to be a much better deal for the borrower than the lender. If you're looking for 8 to 10% ROI, that's not all that hard to do in more traditional investment vehicles with better liquidity. And I'm not comfortable with the risks associated with the higher interest rate loans.