As I have talked about before Prosper is going to sue deadbeat borrowers and I have opted to join the suit as opposed to receiving an equivalent to the last junk debt sale buyout. For me this meant giving up ~$30 to remain on the lawsuits of 6 of my delinquent borrowers.
This past weekend I received 6 emails from Prosper informing my that one of my loans had defaulted (I had 6 that are part of the sale). I have been expecting this as Prosper said that the 1st in the process step requires Prosper to become the owners of the loans. For those opting into the lawsuits you receive $0 up front and an unknown future payout. For those taking the junk debt sale price you likely received an accompanying payment. Here is an example of one of the letters…
One of your Prosper loans has defaulted and been sold to a debt buyer. Proceeds from the sale of this loan, if any, will be credited to your account within 1-2 business days.
Loan: School (Loan #13632)
Sale date: Feb-17-2008
Sale reason: Delinquency
Principal balance before sale: $48.73
Loan value before sale: $59.50
Proceeds from sale and forfeited group rewards: $0
View loan details
Borrowers whose Prosper loans default will have their delinquency and default reported to a credit reporting agency, and will never be able to borrow money on Prosper again in the future. Learn more about defaulted loan sales.
A few minutes later I received the following email from Doug Fuller VP of Operations at Prosper
Legal Test Loans — Erroneous Default Sale Emails
To: Kevin XXXXXX registered on Prosper as RateLadder_com:
You recently received one or more emails stating that “One of your loans defaulted”. It lists a very small amount as the “Proceeds from sale and forfeited group rewards.” These emails were sent in error.
These are loans that are included in the legal test. As was stated in the email describing lender’s options to either “opt-in” or “opt-out” of the test, these loans were defaulted at a zero value.
For those lender’s who “opted out” and chose to accept the debt sale price for their loans, the equivalent proceeds will be deposited in their account.
For those lender’s that “opted in” and chose to participate in the legal test, accounting will be provided in a monthly supplementary statement.
We apologize for the confusion that this process created. Additional details will be forthcoming next week. If you have any additional questions, please contact Douglas Fuller, VP-Operations at email@example.com.
I will keep you up to date with anything else I learn as I learn it.