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.
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6 comments:
The early deliquency letters are not directly related to the "new agency test". They are both collections improvments, but one is before the debt is sent to "collections" and the other is after.
Thanks Rateladder for the clarification. I changed the first sentence in the second paragraph to read "other borrowers" instead of "borrowers in this test group." Does that make it accurate?
When Prosper started I think the main initial focus was on building the user base and getting the technology right. With these recent efforts they are starting to do much better on the loan servicing end of things. I think most lenders consider this a welcome improvement.
I'm a delinquent borrower of Prosper and my debt was sold in December 2007. I finally secured a new job in mid February 2008 (a drastic cut in pay, but a job non-the-less.)
I never received a notice a letter from Prosper or the debt buyer Alliance Credit Services, but approximately four weeks into my new job I did receive a telephone call from ACS's representative law firm Hunt & Henriques out of San Jose, California.
The woman (not an attorney but a collections specialist at the firm) told me I had never made a payment. I told her she was misinformed that I had made payments for six months prior to losing my job. She was adamant that I had paid nothing. I offered to make $400 per month payments on the $5000, but she flat out turned it down saying she was going to note that I had refused to pay.
On the second, third, fourth and fifth calls between us (she called me and I called her), she made sure to tell me that 25% of my wages were going to be garnished. I was crying and trying to explain to her that I'm a single mom and that offering her $400 per month, if she had accepted it I would have been a hardship and left me with only $115 a month for groceries.
When I stated in our last call that I felt I should see an attorney, she advised me not to and use whatever money I would use on an attorney toward my debt.
I'm writing to let those of you that we (myself and others that hit very hard times and defaulted), that it may not be that we refuse to pay the debt, but the hard core collection law firms refuse the payments.
I feel very badly that I was unable to make payments to the individuals at Prosper that put their faith in me. I feel bad that I had to relocate and live with friends because my company didn't even pay into State Unemployment. I feel bad my daughter had to deal with moving, changing schools, not having money and having to be on a state funded lunch program. I feel bad that friends didn't call me to do things with them any more because I couldn't afford to even pitch in toward a video rental.
But feeling bad about all these things were nothing to compared to what I felt at the thought that this law firm is threatening me after being brought to my knees and staying there for nearly a year. I finally get to where I think I might be able to stand up straight again and they refuse my $400 a month payment offer because they want $550 for 12 months so that it's paid in full in 12 months.
The sad part is that 25% of my paycheck is only $240. They would have been better off to accept my offer.
How does this benefit Prosper's lenders?
Thank you,
Ms. S
I want to answer Ms S. She asks "how does this benefit Prosper's lenders?"
The answer is simple. Taking action against massively delinquent borrowers will make future borrowers understand that you actually have to pay back these loans. Right now too many borrowers don't seem to understand this.
Dear Ms S, you've been posting this sob story all over the web. How on earth does this help you?
If one only receives social security and an annunity pension what can they do? Nothing!
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