Some lenders have received emails announcing a new legal test collections effort by Prosper. Prosper will sue selected delinquent borrowers. "This test is designed to determine whether the viable threat of legal consequences will improve the repayment statistics for Prosper loans," according to the email. "[It] is an important step in creating that awareness of consequences." Rateladder has posted a full copy of the email he received.
A couple weeks ago Prosper announced that other borrowers also received letters as part of an 'Early Delinquency' letter series and "the results were good." Prosper reported, "in the three weeks after the letter was mailed 57% more recipients initiated a manual payment (41% vs 26%)."
In October Prosper hired Doug Fuller to lead a legal strategy with collections after facing criticism for being soft on delinquent borrowers. At the time he answered some questions about his history with suing borrowers.
Q: Do you have experience with suing people?
A: Oh yes. Between First Select and Credigy, I have been responsible for making the decision to sue more than 150,000 people. There are a lot of lawyers that can’t claim that number of suits in a lifetime.
Q: Well why don’t we just sue everybody?
A: The phrase “blood from a turnip” comes to mind. One of the ways that you can go broke in a big way is by suing people that will never be able to pay you at all. Simple math, it costs a lot of money to sue people.
Q: Okay, so you need to decide who to sue, then what?
A: Put quite simply, my philosophy is this – if you won’t pay, but can (or will in the future) be able to pay, I’m going to sue you. If I sue you I’m going to win.
Q: That sounds kind of arrogant, can you back it up?
A: Courts in seven states have recognized me as an expert at consumer debt litigation. At Credigy, if a case got really nasty, I would go testify live. I refuse to lose.
Q: Really? What’s your win/lose record?
A: In my last 18 months at Credigy, I testified live at 42 trials. My record was 41-1. By the way, I fired the law firm where we lost.
Q: What’s the toughest aspect of this type of lawsuit?
A: By and large, judges are comfortable if you can show them a signature on a piece of paper. The vast majority of judges grew up long before the internet and the passage of the “e-signature” bill during the Clinton administration. Sometimes you’ve got to spend a lot of time educating them.
Q: How do you do this?
A: I have been qualified as an “expert witness” in seven states on the subject of the electronic records of consumer lending transactions. There was a judge in Texas that had me on the stand for more than three hours – the majority of the time, the judge was quizzing me. Other than I missed the last flight home, I thought it was time well spent – he never questioned any of our requests for default judgment after that.