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[Spider5]

Prosper's statement:

"Person-to-person lending is an increasingly popular way for individuals to borrow and lend money at attractive interest rates. Understandably it must be done in a secure and trusted way. While we’re not in position to comment on another company’s regulatory stance, Prosper believes that the way we have structured the Prosper marketplace is in compliance with applicable state and federal laws. Currently Prosper has over 650,000 members, and more than $130 million in loans have funded through the Prosper marketplace."

Source: Netbanker

[ira01]

Historically, the SEC has suggested it wouldn't take enforcement actions against a condo-hotel developer as long as the company didn't provide prospective buyers with projections of income or expected occupancy, among other conditions.

(emphasis mine)

Could the experian default projection and the portfolio guidance fall into this same category?  Additionally, I participated in a lending seminar organized by Prosper where Karen and Shira stated that ROI=Interest rate minus experian's estimated default rates.

Wouldn't the ads alone be be providing prospective buyers with projections of income?

What, you mean like Prosper's current gigantic banner ad on its home page:

Get Great Rates.

Better than Banks.

Earn 8.74%-12.10% returns.

 

[tash]

Prosper's statement:

"Person-to-person lending is an increasingly popular way for individuals to borrow and lend money at attractive interest rates. Understandably it must be done in a secure and trusted way. While we’re not in position to comment on another company’s regulatory stance, Prosper believes that the way we have structured the Prosper marketplace is in compliance with applicable state and federal laws. Currently Prosper has over 650,000 members, and more than $130 million in loans have funded through the Prosper marketplace."

Source: Netbanker

I think Prosper thinks they're in the clear. This was an interview with Larsen back at the end of '06
http://edcorner.stanford.edu/authorMaterialInfo.html?mid=1624

[Tokyo Joe]

Sounds like trouble like this:
http://online.wsj.com/public/article/SB120735504829291471-rqm93mx4_MYACmJYeyWerCxg5KU_20080504.html?mod=tff_main_tff_top

That would actually be pretty damn sweet for some lenders:

For some buyers, a securities-law claim could provide a way to undo a purchase. "The rights of recovery are so much better if you can say it is a security," said Burton Wiand, a former SEC attorney who now practices at Fowler White Boggs Banker in Tampa, Fla.

If the transaction should have been registered, buyers can rescind the deal and get their money back, without having to prove fraud and misrepresentation, attorneys said.

Turning my -14.5% ROI into a 0% ROI would be pretty sweet!

I don't guess it matters much for small lenders, but for Pensioner ($800K), Muleshoes ($400K), and others it would be worth a lawsuit. In the end, they might pay less in attorney's fees than what they lost on Prosper.

This pretty much would be the most apocalyptic thing that could happen to Prosper; if it all boiled down to this, it would wipe out every penny they have.  Instant BK would probably be their only option, and the bagholding lenders would probably be screwed.

I'm trusting it's not going to come down to that.

[peterhanson]

I really hope it won't come down to that. Prosper is my favourite social lending platform - I think its a great concept and I think it will keep on working and even improving in the future.

[cubbiesnextyr]

I think it will keep on working and even improving in the future.

Who says it's working now?

[ira01]

I really hope it won't come down to that. Prosper is my favourite social lending platform - I think its a great concept and I think it will keep on working and even improving in the future.

Have you read http://www.prospers.org/forum/my_summary_of_prospers_problems-t5708.0.html
and http://www.prospers.org/forum/prosper_lenders_retain_legal_counsel-t8015.0.html?