The person-to-person loan website Prosper.com has been talked about in mostly positive ways since it launched a few years ago. Mark Gimein at Slate’s The Big Money says it’s a lot less awesome than you’ve been led to believe. In fact, he says it’s just a microcosm of what happened in the real financial world: “Loans to unqualified borrowers; reliance on mathematical models that turn out to be a lot less useful than they seemed; failed hopes that high interest rates could make subprime loans profitable; sky high default rates [of 39%]—Prosper has it all.”
Update 9/21: Prosper’s communications director contacted us yesterday to report that “Prosper has refuted and requested a retraction from The Big Money… regarding their egregiously inaccurate story on Prosper and the peer-to-peer lending industry.” Prosper posted a rebuttal on their blog, and since then former/current members of Prosper have posted their own rebuttals to the rebuttal on Prospers.org. As of 9 p.m. ET on January 21st, 2009, The Big Money had not issued any retraction or correction.
“You Are Unlikely To Prosper” [Slate’s The Big Money]