Prosper’s First Anniversary
First of all, let’s take a moment to celebrate. On Feb 5, Prosper turned one year old. In our first year, exactly 7048 loans with a value of $35,166,711 were made on the Prosper marketplace. If you’re coming from the perspective of a massive bank, $35M might not seem like a lot. Considering that all of that money came out of actual people’s pockets, it’s quite amazing.
Customer Support Improvements
We are in the process of significantly improving the support we provide our community. We have not met your standards, or our own, for customer support. While our service levels will not be transformed overnight, our hope is that you have already seen an improvement in our response time.
The biggest change is our plan to manage customer support ourselves rather than rely on an overseas provider. By the end of February, all customer support will be handled in our San Francisco office. Concurrently, we are making changes that will allow us to speed up key processes, such as identity verification and the loan review many borrowers go through once their loan is funded.
As a result you will experience speedier and more professional answers to your inquiries.
Friends and Endorsements
Back in August, we started allowing group leaders to write an endorsement for their group members. Since then, a group of Stanford MBA students did a regression analysis of lender bidding, and found that a group leader endorsement was the single biggest contributor to increased bidding on a borrower’s listing. A GL endorsement turned out to be twice as valuable as improving by one credit grade. Said another way, a GL endorsement is worth two credit grades.
To encourage and expand this kind of activity, we’re introducing the concept of Prosper “friends”, who can leave an endorsement, just like a group leader. So very soon you’ll start seeing borrowers have multiple endorsements, from GLs and also from their friends. Also, importantly, if a friend places a bid on that borrower’s listing, we’ll highlight that bid as the truly strong endorsement that it is.
In addition to helping borrowers get funded, a borrower’s friends will also be notified if the borrower goes 15d late. We hope that this virtuous cycle of endorsement and accountability will improve delinquency rates among borrowers.
Additional Credit and Employment Data
In response to requests from lenders, we are making more Experian credit data available. Now lenders will have six additional credit data fields and four new self-reported employment status fields to review. This new data will help lenders further evaluate a borrower’s loan request.
New credit fields:
Amount delinquent: Total past due amounts owed by the borrower. This includes any charge-offs or other unpaid derogatory balances. This includes amounts included in Chapter 13 bankruptcies, but excludes all other bankruptcies.
Public records in last 12m: The number of negative public records on the borrower’s credit report over the last 12 months. Negative public records include, among other things, bankruptcies, liens, and judgments.
Current credit lines: The number of credit lines presently current that have been reported within the last 6 months. These lines can be open or closed.
Open credit lines: The number of credit lines presently open that have been reported within the last 6 months.
Revolving credit balance: Sum of outstanding balance on all open revolving credit lines reported within the last 6 months.
Bankcard utilization: Overall balance/limit ratio on open bankcards reported within the last 6 months. Calculation: (sum of total balances) / (sum of total limits)
New employment fields:
Employment status: The borrower’s employment status. Options include: full-time, part-time, self-employed, retired, and not employed.
Length of status: The number of months and years that the borrower has had the stated employment status. If employed or self-employed, since when has the borrower held their current job or owned their current business? If retired or not employed, since when have they had this status?
Occupation: The borrower’s current occupation.
Income range: The borrower’s current income range, in $25,000 increments, or over $100,000. A borrower may also decline to state their income range, in which case “Not displayed” will be shown.
Also, (and this is my favorite feature), you won’t have to keep clicking that little “plus” button next to the credit grade to expand the additional credit data. If you like it expanded, it will always be expanded. If you like it collapsed, it will do that, too.
Questions & Answers
Are you tired of going to RML to see if anyone has asked a borrower substantive questions about his or her listing? Now you can ask a borrower a question directly from the listing page, and if the borrower chooses to answer it, they can also choose to publish it on the listing page so that everyone can see it.
We have built a new tool that will help lenders understand how different characteristics contribute to a portfolio’s ROI (Return On Investment). Located on the Marketplace Performance page, this tool will enable lenders to create projections of expected returns based on the actual performance of loans to-date.
Credit Grade Adjustments
Borrowers with an Experian Scorex PLUS(SM) credit score below 520, and borrowers with an NC (No Credit) rating, will no longer be able to borrow on Prosper given their low appeal to lenders relative to the costs and resources required to process their listings.
The underlying Experian Scorex PLUS credit score range for E and remaining HR (High Risk) borrowers will change slightly to be consistent with the spread for other credit grades. There will be no credit grade changes for borrowers with an AA, A, B, C or D credit grade. The credit grade spectrum is shown below:
Borrower & Lender Fee Changes
Not surprisingly, it costs more to list and service loans from borrowers with lower credit grades. To better align our fees with these costs, we are raising the closing fee for E and HR borrowers and the servicing fee for lenders on loans made to B, C, D, E and HR borrowers. The new fee structure will only apply to listings created after February 11, 2007.
New borrower closing fees:
AA – A: 1%
B – D: 1%
E- HR: 2%
New lender servicing fees:
AA – A: 0.5%
B – D: 1.0%
E- HR: 1.0%
Failed payment fees also will change from $5 for each incident to $15 per monthly billing period (subject to state limits).
Group Leader Reward Changes
We’re making a significant increase to the revenue that group leaders can earn. In recognition of the effort they put forth to grow and manage their groups, group leader match rewards will change from a flat $10 or $20 to .5% of a funded AA, A, B, C or D loan from a new borrower to Prosper. There will be no match rewards for loans made to E or HR borrowers.
This match reward change should drive a dramatic increase in new high quality listings. A group leader can now earn four times what they could earn before for an average listing and twelve times their previous return for a $25K loan.
100% Identity Theft Guarantee
Prosper will now offer a “100% Identity Theft Guarantee” on all funded loans. Although we have a stringent process in place to prevent fraudulent persons from using stolen identities to acquire loans, there are still limited times when identity theft occurs. In the future, if a loan goes into default because the borrower is a victim of identity theft, we will repurchase the loan from the lenders for the unpaid principal amount.
Collection Agency Shuffle
As of today, we are removing NCI as a collection agency, and replacing them with Firstsource, LLC. All lenders who had NCI chosen as their default collection agency will now have Firstsource set as their default agency. Additionally, all loans in collections with NCI have been transferred to Firstsource.
What’s new on Prosper?
There’s a new page under the “Home” tab called “What’s new?”, where you can see what the biggest changes from each big site update has been, all the way back to the original site launch on Feb 5, 2006.
I haven’t had time to digest this, hence I gave you the announcement verbatim. Expect commentary in the future.