Prosper Inc, a peer-to-peer lending company, admitted that it loans are much riskier to investors than its marketing material might lead investors to believe in a new 10-K filing with the Securities and Exchange Commission last week.
In the company’s 10-K disclosure, Prosper said that “Our Notes involve a high degree of risk” and that “You should be aware that the Notes offered through our platform are risky and speculative investments. The Notes are special, limited obligations of Prosper and depend entirely on payments to Prosper of obligations of borrower members under the corresponding borrower loans. Notes are suitable only for lender members of adequate financial means. If you cannot afford to lose the entire amount of your investment in the Notes you purchase, you should not invest in the Notes. ”
Prosper also disclosed delinquency rates for the loans on its peer-to-peer lending marketplace.
- 11,569 loans, or 39.9%, have been more than 15 days past due on at least one occasion;
- 10,342 loans, or 35.6% have been more than 30 days past due on at least one occasion;
- 9,424 loans, or 32.5% have been more than 60 days past due on at least one occasion;
- 8,514 loans or 29.3% had defaulted (a borrower loan is considered to have defaulted when it is more than 120 days past due or has been discharged in bankruptcy).
Prosper also noted data for the loans that have been originated since it reset its borrower criteria when re-launching its service in July of 2009.
“From July 13, 2009 to December 31, 2009, we facilitated 2,034 borrower loans with an average original principal amount of $4,369 and an aggregate original principal amount of $8,886,296 on our platform. There have been no repurchases by Prosper due to identity theft or operational issues. As of December 31, 2009, of the 2,034 borrower loans, 96.5% were current, 2.9% were paid in full, 0.3% were 16 to 30 days late, and 0.3% were more than 30 days late. As of December 31, 2009 of the 2,034 borrower loans, no borrower loans had defaulted.”
- 19 loans, or 0.9%, have been more than 15 days past due on at least one occasion;
- 9 loans, or 0.4% have been more than 30 days past due on at least one occasion;
- 3 loans, or 0.2% have been more than 60 days past due on at least one occasion;
The new notes that Prosper seems to be facilitating appear to be performing much better, however the loans have not had time to age and the delinquency rates will likely rise over time.
