Author Topic: "Recently came to our attention" ... net annulaized returns not accurate  (Read 27886 times)

kaw753

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The notice said to contact that e-mail address if I had more questions and I did. They then sent me a quarterly breakdown of their errors, so it does exist for each customer.



SeanMCA

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83.5% - The percentage of active investors who received returns that met or exceeded their expectations

Prosper should probably remove this statistic from their marketing materials since the footnote says that "Results are based on responses from 357 Active Investors to an email survey sent to 2,600 randomly selected Active Investors conducted between 5/2/16 — 5/19/16. Active Investors are defined as individual investors who bought a note within the two months before the survey." 

Since so far it looks as though returns were being misreported at least as far back as July 2015, those investors were being asked to judge returns that were wildly inflated. And then Prosper used that illegitimate feedback to solicit new investors and still are...



« Last Edit: May 05, 2017, 03:13:29 PM by SeanMCA »
I'm a merchant cash advance veteran exploring the p2p lending waters.

Fred93

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I think they owe it to everybody to show what the number was prior to the fix. I didn't make it a habit of screenshotting my returns either...

Wow.  I disagree.  What they owe you is the correct number.  There is no value in going back and spending time and mental energy on wrong numbers.

Fred93

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I think they used to explain the formula somewhere or maybe that was LC.

Indeed.  The explanation (they provide it in words rather than a mathematical formula) appears several places on their web site, and has not changed in many years.

Quote
To calculate Annualized Returns, a total gain or loss is calculated by summing all loan payments received net of principal repayment, credit losses, and servicing costs. The gain or loss is then divided by the average daily amount of principal outstanding to get a simple rate of return. To annualize that rate, we divide it by the dollar-weighted average Note age of your portfolio (calculated in days) and then multiply it by 365. Our Annualized Return calculation includes all Notes issued and sold by Prosper Funding LLC and Prosper Marketplace, Inc. since July 15, 2009

This is actually a pretty straightforward formula.  It is identical in spirit to lendingclub's NAR, although there are differences of style.  Prosper counts days, whereas LC counts months.  Prosper doesn't compound the result, LC does.  The two formulas are described differently, so it isn't easy to see immediately that they are the same thing.

The denominator confuses most people, what with the "age" words in there.  Its actually pretty simple.  The numerator sum contains interest that was earned over a certain number of days, so they divide by that number of days to get a 1 day return, and then multiply by 365 to get an annual return.





policeneauts

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I just called them, they're going to be emailing me my previously misstated return figure(s).  I'm pretty certain though it's dropped by 30-50%.  I'll be filing with Consumer Financial Protection Bureau.

I'm surprised there isn't more widespread outrage across the internet on this.  Maybe it will take a few days, as I ignored the email they sent me two days ago and only in logging in randomly today did I see the note.

bobeubanks

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I'm surprised there isn't more widespread outrage across the internet on this.  Maybe it will take a few days, as I ignored the email they sent me two days ago and only in logging in randomly today did I see the note.

Mine only dropped about 1/2 of a %. It was 10.?? and now 9.73%. I might be special: most of my notes are A and B and I've not made new investments for 3 years.

TWLMG

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Wow, I'm doing something wrong. You're getting over 9% return on A and B loans. I'm trying to get that and I'm funding HR and E loans. Props to you, my good sir.
The more knowledge we share, the better and more successful we’ll all be.

ktrdsl23

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The Financial Times reported on this issue.  They quoted my posts from the first page of this thread in their article.

https://www.ft.com/content/91d9bc96-30f0-11e7-9555-23ef563ecf9a

bobeubanks

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Wow, I'm doing something wrong. You're getting over 9% return on A and B loans. I'm trying to get that and I'm funding HR and E loans. Props to you, my good sir.

When I began investing return projections over the grades after projecting for defaults were pretty flat. I didn't see any benefit from taking extra risk to gain what was projected to be just a very slight higher return.

panther02912

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ktrdsl23--can you post the article text.  I'm getting a pay-wall.

My account has loans mostly 2-3 yrs old, biased towards lower grades.  I think my quoted returns dropped from  ~12% to about 6%, but am not sure since they removed the old number.  I am certain that I made ongoing investment decisions based upon the prior, higher number.

Prosper screwed up, big time IMO.  I emailed them requesting:

1 My annualized Return numbers before and after the revision.
2 Details about how theyr evised the calculation to reach the new return numbers.  Had they neglected a factor or used an incorrect formula?
3 Details about about how the revision affects theinvestor population overall. For example, a new by old plot of returns and a quantile-breakout of adjustments amount.  Was my account's downgrading typical or one of the worst?

Fred93

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Instructions for reading FT.COM (Financial Times) without a subscription...

As you have noted, direct links to FT.COM articles only work for folks with subscriptions (paywall).  The secret is to search for the article at google, and then click on the google link.  FT allows folks who link from google to read an article without a subscription.  Go to google.com, and type the following into the search bar...

prosper admits miscalculation site:ft.com

Google will promptly find articles on FT which contain these words, which will of course include the one linked above.  Click on it.

The article doesn't say anything you don't already know from reading this thread.

kaw753

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I just submitted a complaint to the SEC as wiki indicates this is who regulates peer to peer lenders.

ktrdsl23

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ktrdsl23--can you post the article text.  I'm getting a pay-wall.


Just follow Fred's instructions.  The article says not to cut and paste on the web.

nonattender

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ktrdsl23--can you post the article text.  I'm getting a pay-wall.


Just follow Fred's instructions.  The article says not to cut and paste on the web.

Which is humorous, given that this is the forum thread from which the author of that article felt free to cut and paste.

(Let's put up a "paywall" and charge the "journalists" and "analysts" and make a fortune.)
A little nonsense now and then is relished by the wisest men.

ktrdsl23

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ktrdsl23--can you post the article text.  I'm getting a pay-wall.


Just follow Fred's instructions.  The article says not to cut and paste on the web.

Which is humorous, given that this is the forum thread from which the author of that article felt free to cut and paste.

(Let's put up a "paywall" and charge the "journalists" and "analysts" and make a fortune.)

I'm waiting for my seven figure paycheck when they contact me to turn the story into a movie   :P