I have never considered the description something that would be verified by prosper. I have no problem though adding a message that states the information is unverified.

This places Prosper in an intolerable situation. They advise borrowers with income that is hard to vet to not state income. There is nothing that then prevents the borrower from stating an income in the description and even to have a GL "vet" that income description.

If the loan now goes sour and the borrower is unable to repay, then you have an almost prima facie case of fraud. But now, who is liable? The GL that vetted the income? The borrower that stated an specific income, that might have been a pro forma income, based on forward looking? Prosper for not vetting something that they clearly did not intend to verify since they don't even always verify stated income?

It's a nightmare.

Then there are the other things such as misrepresentation with pictures.

What about loans like Tractorpartsguy? Is Prosper liable for not vetting anything about that loan?

I don't think Prosper should add that message (which will only encourage borrower lies), unless the message is something like: "Although the description is legally a material part of the loan application and intentionally making false statements in a loan application is a crime, Prosper does not generally verify the information contained in the description."

As can be seen above (and as I previously posted on .org), I am pretty confident that the description is legally part of the loan application, and it is, indeed, fraud for a borrower to intentionally make false statements therein. That said, I disagree that Prosper therefore has a duty to verify the statements made in the description. That is simply not practical, as many others have noted.

I do believe, however, that it would be a good idea for Prosper to take legal action (refer strong cases to the appropriate authorities for criminal prosecution and/or sue the borrower in civil court for fraud) in a few, carefully selected strong cases, and heavily publicize these actions as a deterrent to the fraudsters. Prosper needs to avoid becoming known as an easy mark (or to change that attitude if it is already too late to avoid it).

I'm glad you agree ;) Seriously, there is no legal fraud until there are damages. Even if somebody lied their arse off on a loan listing, if they pay on time, there is no prima facia case for fraud. It just doesn't exist, even if we think they lied.

Yes.

A very long time ago, Prosper said that they would go after certain cases with as much zeal as they possibly could, even though it would cost them more than they would recover. To date, I have seen no evidence of that. What should be done? Prosper should pursue wire fraud charges. Yes, I understand it's a criminal investigation that they can't control or even force, but they sure can lean on the DA. I believe morally and ethically they have a duty to follow through on those statements, but legally, I think we're SOL.

Personally, I think Prosper walks a fine line with their half-arse verification policies. IMHO, they ought to be completely lasse faire (sp) and let the market function on its own, or be more consistent and rational in their verification. Their idea of "when we choose to verify a loan, we hold it up for two weeks and then cancel it" just doesn't fly with me. It cuts into my returns... which is one reason I'm cutting back on even my relending.

Which is why I don't like the fact that Prosper sells the rights to our loans at >120 days late. I wish they'd hold onto the rights forever, and sue the borrowers themselves. (BTW, I think that is the only practical solution for "collections" but that's for a different thread.) When we lenders receive a % of the lawsuit proceeds, we'll learn how to figure out which borrowers have something worth suing over, and which ones don't, ala the homeowner/nonhomeowner issue from JDB sales.

Yeah. One of my defaults promised that he would pay back every penny. Considering he was a first-pay default, I think he's a poster boy for a fraud investigation. BTW, that's something Prosper needs to do... go after first pay defaults vigorously. Sure, there's more fraud than just first-pay defaults, but those have to be the easiest to prove intent.

B-G, I don't know about how binding the discription is or should be in a listing.

However, salesmen have told a life time of lies and Borrowers the world over,

are no different. Some of my fellow Super Heros claim that, they can fly.

The fact of the matter is that, some Heros ; Swing, Sling, Throw themselves, Leap

or Ride through the air, few truely can fly. Is this stated ability a fraud? G-L

My view: Any intentional misrepresentation to induce reliance that DOES induce reliance is fraudulent. Any damage suffered by a lender who relies on the fraudulent description in deciding to loan (assuming there are no red flags) is actionable. Basic California fraud law.

Whether Prosper verifies the statements or not, fraudulent misrepresentations would be actionable against the borrower directly. Prosper disclaims liability by disclosing it doesn't investigate the truth of descriptions. I have no opinion on whether that disclaimer would fully protect Prosper, which has set up the system by which the descriptions are made, but I think it is very smart of Prosper to examine listings where the descriptions appear false and the potential fraud is called to Prosper's attention.

The one listing I flagged for Prosper for this very reason did not pass verification just this week.

go to the org site and introduce yourself to victoria crawford

Victoria Crawford is a civil issue. It's no different than what a JDB will do. I think most of us want to see criminal prosecutions -- that involve jail time.

From what I understand, taking the civil route was the fastest way to freeze the monies involved. But I do agree with you, I hope the criminal route is also pursued.

I agree completely. Prosper warrants that the Scorex information they provide is legitimate (and this is backed up with the no-fraud guarantee in the case of identity theft). They make no claim to verify the description, but have been known to take action when someone is clearly lying. My understanding is that they have no liability to discover these lies, but they are obligated to cancel the loan when the lies are pointed out to them.

I also whole heartedly agree that criminal (not civil) prosecution of a few fraudsters is the best place to start. There are a few instances that are open and shut cases - why not start with those? If the fraudster links a checking account and verifies an address, it can't be that hard to track them down.

If I remember correctly, there have been several instances where Prosper has honored their "no fraud guarantee" by buying up the entire loan. Isn't there at least incentive for criminal and civil court proceedings in those cases?

I think the best way to put it is that borrowing money that you are unable to pay back is a civil issue. Borrowing money that you have no intention of paying back is a criminal issue.

Can we get a summary of the Victoria Crawford story on this board?

1. Victoria Crawford allegedly took out 10 Prosper loans using false identities.
2. A forum member figured out something was hokey with these 10 loans (they had certain points of similarity besides all failing to make the first payment).
3. After much discussion on the forums, Prosper repurchased all the loans.
4. We recently learned that Prosper apparently had reason to believe that some of the money was still in certain Bank of America bank accounts a few months ago.
5. Prosper brought a civil action for fraud in the Los Angeles County Superior Court, seeking (and obtaining) an injunction freezing the bank accounts.
6. Further proceedings are scheduled.

ETA: Oh yeah, I forgot to mention that one of the characteristics in common that helped uncover this fraud was that they all had the same city listed. So what did Prosper do then? It took away the city information so lenders could no longer use it to identify frauds.

Thanks for the info. That reaffirms my belief that city details should be a mandatory detail (or at least something that savvy borrowers have to opt out of, thereby marking themselves as higher potential risks).

I wish that desriptions were verified but since Prosper loans are unsecure personal loans, the industry standard is not to verify what the loans will be used for.

I took out a personal loan at the end of 2005 from USAA to fully fund my ROTH IRA contribution since I didn't have the cash on hand and other than putting "to make 2005 ROTH IRA contribution" in a quick 'reason for loan' section, it wasn't verified by the bank or anything along those lines.

I think it would be great if Prosper initiated a plan to help those claiming to consolidate CC debt. If a CC consolidation loan was filled, Prosper could then ask for the account numbers where the debt was held to make payment. I doubt this will be applied though.

I try not to let the loan descriptions strongly influence my bidding although I've asked/recieved business plans for a few loans requesting funds for business opportunities which has led me to loan to individuals whose criteria wouldn't have otherwise made the cut.

That would add a huge amount of overhead (and error prone paperwork) to the process, so I don't see Prosper doing anything along those lines.

On the other hand, there's no reason that a Group Leader couldn't take that burden on themselves. If you have friends or family members who need a Prosper loan but are awful about managing money, I believe it would be possible to set up a joint account with them and cut up all of their checks/debit cards on the account. Post verification documents in the RML forum quantifying their credit card debt and rates, and you're off to the races to collect the referral fees and group rewards.