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While it might not make a difference to someone in dire straits or in a bankruptcy, it could help keeping the community aspect alive within Prosper: it’s within the rules to send a late borrower a note with a reminder.

I’m treading on thin ice because lenders on Prosper have had their accounts suspended by taking this too far so if you do contact a borrower be careful. To be safe, never contact a borrower after the loan is in default. The legal limit here is that you are not allowed to make any attempt to collect a debt on Prosper’s behalf.

The terms of service state:

You should not contact delinquent borrowers directly. Prosper has a detailed delinquency schedule for borrowers, and any additional contact you have with a borrower may expose you to civil or criminal penalties for unlicensed debt collection. The language and tone you use when collecting a debt matter are important in the eyes of the law so what you might consider reasonable may in fact be illegal. If you were to accidently[sic] break the law you'd be putting yourself, your fellow lenders, and Prosper at risk of litigation.

What this means is you are allowed to contact your borrowers if they are just late. I have done this on two occasions now, and both loans have become current. One borrower replied almost instantly with a ‘don’t worry, payment in transit’ note which was nice to read. Not only did it remind the borrower that we are people but also allayed my fears of fraud.

Here is a suggestion for a note you can send, modify it to suit your needs, but consider doing it. The more people that contact late borrowers, the more likely they are to remain current. While it might not make a big difference, small differences are significant.


I wanted to congratulate you on your recently funded loan. I was one of the winning bidders and am glad to be of assistance in fulfilling your request. Your loans metrics and reasons met my personal criteria for risk; it would appear it did for others as well.

I am writing to urge you to keep in mind that I and the others are all individuals, not banks or institutional lenders, and we are counting on your repayment. I’ve decided to take a leap of faith; Prosper has a significant number of defaults and delinquencies, especially later in the loan cycle. This is very damaging to the lenders portfolio and has caused many to pull their money out of Prosper in search of better returns.

Prosper is an excellent resource, I personally believe very strongly in the idea of community lending and want this concept to succeed. It takes both sides to make this work so please take note of your loans late status and rectify it.

It’s good to know you can turn to your peers again in the future and I know from experience it’s much, much easier to get funded once you have had success with Prosper. Wishing you luck and a successful transaction.


At February 19, 2008 at 5:03 PM Tom said...

That's a well written letter.


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