Thursday, July 19, 2007

Prosper refunds fees on 400 loans

Prosper announced that they would be refunding failed payment fees to borrowers in about 400 loans. Borrowers pay their loans through automatic withdraws on their bank accounts. The transfer may fail if the account has insufficient funds or the bank account on file is out of date or incorrect. In either case, the borrower pays a failed payment fee and can fix the problem with no further penalty by making a manual payment and ensuring the bank account has sufficient funds. Failed payment fees vary by state but can be as high as $15.

Failed payment fees are different from late fees which are charged when a loan payment is 15 days late. Late fees are the greater of $15 or 5% of the unpaid installment amount, also depending on state lending limits. Late fees are passed on to lenders and divided up proportionally according to the percentage of the loan that the lender owns while failed payment fees go to Prosper.

Here's the full text of the failed payment fee adjustment announcement:

"I wanted to let you know that over the past two days, we have been adjusting failed payment fees for about 400 loans in which we had overcharged the borrower for failed payment fees. As a result of overcharging the borrower, lenders received less than their share of loan payments since those loans were brought current.

As a result, lenders who are participating in these loans will see line items in their account history with purposes of "Principal adjustment", "Interest adjustment", and "Service fee adjustment". Because the fee discrepancies were small, the adjustments will probably also be small."

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