Prosper Announces Major Changes to Groups Concept
In an email dated today, Prosper announced that they would be removing the so-called “Group Leader Rewards” option which allows Prosper group leaders to collect a portion of their borrowers’ interest payment as a fee for providing service (in the form of the group’s performance and reputation) to the borrower.
Frustrated lenders (and non-reward-collecting group leaders) have complained for months on Prosper’s discussion forums that group leader rewards were causing unscrupulous leaders to collect additional (and exorbitant) fees from unsuspecting borrowers.
Following the announcement, in a forum post, most lenders lauded the decision. “This is fantastic news. Their wording is almost identical to the wording we have been using in our requests/justification to have this happen,” said lender Urbi_et_Orbi.
The full text of Prosper’s announcement email is here:
Dear (Name),
At Prosper, we have been listening to your feedback regarding groups and group leader rewards.
The original philosophy behind Prosper Groups was to enable borrowers in close-knit communities to leverage the reputation and peer pressure of their group to attract more bids from lenders, resulting in potentially lower interest rates for borrowers, and lower default rates for lenders. We have found, after nearly two years of experience, that the strongest groups are comprised of close networks of friends and associates, where compensation is not the dominant motivation for the group leader’s services.
As a result, we are making changes to Prosper Groups. In the next month, Prosper will discontinue payment rewards on new loans for group leaders. Group leaders will continue to earn payment rewards on all eligible loans originating before the change. Group leaders can also receive referral rewards for referring borrowers or lenders to Prosper under our Referral Program.
We hope this change will encourage group leaders to grow their groups by inviting new members from their pre-existing social networks, turning Prosper Groups into a more powerful community development tool and making Prosper simpler for both borrowers and lenders.
For more details on these changes, please visit our Group Changes Frequently Asked Questions (FAQ).
Thank you for helping us become the Internet’s leading community lending site.
Sincerely,
Prosper