NYTimes criticizes, Prosper responds

Consumer Protection Agency Adviser Had Role in Soured Loans

Excerpts:

Rajeev V. Date, a former banker who was hired this month as a senior adviser to Ms. Warren, was an active participant in the debate over the Dodd-Frank Act, the financial regulation bill that created the consumer bureau. During that time, he also served as a director of Prosper Marketplace Inc., a so-called peer-to-peer lender that operates an online market to match consumers seeking loans with lenders. In its first four years of operation, more than 25 percent of the loans it helped arrange went into default, according to the company’s financial statements.

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He became a Prosper Marketplace director in January 2009, and that year received stock-option awards valued at $114,322, according to company filings. On April 15, 2010, Mr. Date was one of six investors in a $14.7 million private placement of Prosper stock.

Prosper Marketplace, based in San Francisco, matches borrowers and lenders and charges both parties fees related to the loans. The S.E.C. imposed a cease-and-desist order on the company in November 2008, before Mr. Date joined the board, but the company has continued to settle cases with state regulators over the last two years.

While Mr. Date was on the board of the company, Prosper took an interest in the Dodd-Frank debate. It hired the well-connected Washington lobbyist Tony Podesta to try to shape the legislation so that peer-to-peer lenders like Prosper would be regulated as banks, and no longer under the purview of the S.E.C., which has maintained that the company’s packaging and sales of loans to investors constituted a securities offering.

The effort was unsuccessful; the S.E.C. still regulates the business though parts of it will also most likely fall under the new consumer bureau.

Prosper Response: New York Times Article October 27, 2010

Excerpt:

Today a highly misleading article appeared on the subject of one of our former board members, Raj Date. Raj has just been appointed by Elizabeth Warren to a special advisory post at the Consumer Financial Protection Bureau. We are very proud of Raj’s track record of consumer advocacy and championing reform in the financial services industry.

The article made several erroneous statements about Prosper and Raj’s relationship with us, despite our having shared information with the reporter while he was writing the article that directly refuted his assertions. In fact, several of the assertions are patently incorrect based on a cursory review of our site. The reporter chose to ignore the facts and go ahead with the slanted perspective for reasons that are not clear.

The misstatements and misrepresentations include the following:

Comment: Interesting. Read the entire Prosper response for their points