Author Topic: Collections & Transparency  (Read 15093 times)

Zach

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Collections & Transparency
« on: December 26, 2012, 09:11:03 PM »
One aspect of both Prosper and Lending Club that has always angered me in terms of transparency is the collections/recovery of defaulted loans. As I'm sure many of you will agree, you would like to see everything going on with your non-performing loans.

In past, I was particularly impressed by the no-longer SVP of Legal and Collections, Jack Cohen. While I always understood that there are limitations on information that can be disclosed to investors on late loans, he was always eager and willing to take my calls (anytime) to address questions on specific loans and provide general information on his team, and collections processes. After a recent attempt to collect further information from the new collections manager, she continually insisted on transferring me to investor services without answers to any questions. I feel strongly that there should be more information available to investors on detailed collections processes, and recovery statistics (beyond the one chart that is not up-to-date).

Another flash from the past were the regular investor webinars to keep us up-to-date on different topics going on inside Lending Club and some how-to invest guides. Due to changes in personnel, combined with a plentiful supply of investor dollars, there is no need to divulge resources in this area. I would love to see these webinars return on different topics.

Finally, I am curious as to whether or not anyone has seen any cases of legal action against a borrower. I have never seen such an occurance with my notes. At the same time, I'm not sure if litigation is always noted in the collection logs or if a recovery payment would simply show up. The recovery payments also should be more apparent to investors and have an impact on the loan itself itself (otherwise recovery payments cannot be accounted for in response to defaults, as currently they don't impact principal balances in note detail).

I would like to hear others thoughts on these collections/transparency issues!

yojoakak

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Re: Collections & Transparency
« Reply #1 on: December 26, 2012, 10:48:30 PM »
Here's one where they drafted the lawsuit 6 times. Is that some kind of record?

Never collected a dime on it, though.

https://www.lendingclub.com/account/loanPerf.action?loan_id=459562&order_id=855865

Zach

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Re: Collections & Transparency
« Reply #2 on: December 26, 2012, 11:03:57 PM »
Here's one where they drafted the lawsuit 6 times. Is that some kind of record?

Never collected a dime on it, though.

https://www.lendingclub.com/account/loanPerf.action?loan_id=459562&order_id=855865

Very interesting....I wonder how that is even possible (drafting a lawsuit so many times). They note in the collection log that default judgement is granted. Garnish wages? SOMETHING!

Why bother with a lawsuit (time/money) if there is no intent to use the judgement?

Have you seen other cases with litigation involvement?

I seriously am inclined to e-mail them on this one to find out...

DanB

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Re: Collections & Transparency
« Reply #3 on: December 27, 2012, 04:51:53 PM »
Well..........As someone who is fine with collections the way they are, I have no interest in subsidizing additional collection efforts. So may I suggest a multi-tiered service charge schedule (below) so that those who want more effort/info/details can pay for more themselves:

 a reduced 0.5%............for those of us who are ok with efforts as they stand.

1.5% for those who want a more rigorous collection effort

2.5% for those like zpbsfg who want a more rigorous effort, more transparency plus a phone contact person at their beck & call who they can discuss each & every late loan with.

graceful

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Re: Collections & Transparency
« Reply #4 on: December 27, 2012, 08:01:06 PM »
Makes sense to me.  ;)

Zach

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Re: Collections & Transparency
« Reply #5 on: December 27, 2012, 09:00:13 PM »
Well..........As someone who is fine with collections the way they are, I have no interest in subsidizing additional collection efforts. So may I suggest a multi-tiered service charge schedule (below) so that those who want more effort/info/details can pay for more themselves:

 a reduced 0.5%............for those of us who are ok with efforts as they stand.

1.5% for those who want a more rigorous collection effort

2.5% for those like zpbsfg who want a more rigorous effort, more transparency plus a phone contact person at their beck & call who they can discuss each & every late loan with.

I'm not trying to imply that I need option 3 - simply trying to make a statement that there is much that is being done on the investor front.

You should really care what happens with collections DanB. If LC followed through with a lawsuit effort (as yojoakak noted) recovery rates would hopefully increase. I'm very satisfied with returns, just looking at ways that they can increase (as I'd think you do too).

DanB

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Re: Collections & Transparency
« Reply #6 on: December 27, 2012, 10:13:59 PM »
zpbfsg...........Hey, I'm just responding to stuff you mentioned was important to you...............& suggesting where the money should come from (i.e. from you)

And no, I don't really have to care about collection efforts because I don't have & haven't had notes in collections for almost 2 years now. So, I'm sorry but yes I'm reluctant to pay for futile collection efforts that don't have anything to do with me.................just so that others can feel that something is being done for them.

« Last Edit: December 27, 2012, 10:17:55 PM by DanB »

Zach

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Re: Collections & Transparency
« Reply #7 on: December 27, 2012, 10:29:24 PM »
zpbfsg...........Hey, I'm just responding to stuff you mentioned was important to you...............& suggesting where the money should come from (i.e. from you)

And no, I don't really have to care about collection efforts because I don't have & haven't had notes in collections for almost 2 years now. So, I'm sorry but yes I'm reluctant to pay for futile collection efforts that don't have anything to do with me.................just so that others can feel that something is being done for them.

Do you not have much money with p2p lending - how do you not have notes in collections?

DanB

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Re: Collections & Transparency
« Reply #8 on: December 27, 2012, 10:41:00 PM »
No offense but if you surmise that the only way of not having notes in collection is due to not having "much money" in p2p lending then I'm afraid that our respective p2p "knowledge gap" is too great for me to help you bridge it at this point in time. I have over 1700 notes in just one personal LC account.............to say nothing of the other ones.  :)

yojoakak

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Re: Collections & Transparency
« Reply #9 on: December 28, 2012, 02:16:13 AM »
Do you not have much money with p2p lending - how do you not have notes in collections?

DanB has the inside line on a magical bucket of notes that never have any problems. He could tell you how he does it, but then he'd have to perform a mind-wipe on you so it's best just to not ask too many questions.

Zach

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Re: Collections & Transparency
« Reply #10 on: December 28, 2012, 04:51:28 AM »
No offense but if you surmise that the only way of not having notes in collection is due to not having "much money" in p2p lending then I'm afraid that our respective p2p "knowledge gap" is too great for me to help you bridge it at this point in time. I have over 1700 notes in just one personal LC account.............to say nothing of the other ones.  :)

OK, I guess. I assume you must have more conservative investments (A or B grade) and can pick top quality loans - it is possible. Everyone (you included) is bound to get some notes in collections at some point (assuming a large enough portfolio). If that's not the case, the rest of us must be crazy, and I'll oblige and say that I really don't know very much about p2p lending - regardless of my 4 years of investing experience, 5 accounts, and thousands of loans.

P.S. I would love to see your notes.csv from LC to track your magic! If nothing else, what's the average age of your portfolio?


DanB has the inside line on a magical bucket of notes that never have any problems. He could tell you how he does it, but then he'd have to perform a mind-wipe on you so it's best just to not ask too many questions.

Interesting theory....

DanB

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Re: Collections & Transparency
« Reply #11 on: December 28, 2012, 06:37:33 AM »
If you have 4 years experience & thousands of loans then you're likely trying to pull my leg & already know the answer to the questions you're asking. Furthermore, you also likely know that what I'm saying is very possible regardless of the avg. age of my loans (which range from 16-24 months) &/or the "grade" of my notes (which are approx. 60-70% C or below) I have virtually no A rated ones.

 If in fact I'm wrong with all my above assumptions, then may I be so bold to suggest that perhaps you've spent way too much of the last 4 yrs. concerning yourself with dead end issues like improving "collections" which even if implemented would likely yield but a tiny increase in your returns  :)

Zach

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Re: Collections & Transparency
« Reply #12 on: December 28, 2012, 10:14:08 AM »
If you have 4 years experience & thousands of loans then you're likely trying to pull my leg & already know the answer to the questions you're asking. Furthermore, you also likely know that what I'm saying is very possible regardless of the avg. age of my loans (which range from 16-24 months) &/or the "grade" of my notes (which are approx. 60-70% C or below) I have virtually no A rated ones.

 If in fact I'm wrong with all my above assumptions, then may I be so bold to suggest that perhaps you've spent way too much of the last 4 yrs. concerning yourself with dead end issues like improving "collections" which even if implemented would likely yield but a tiny increase in your returns  :)

You would be mostly wrong. Collections is only one component to a well-performing portfolio. Most of my time investments into p2p lending have been geared at statistical analysis.

I'm waiting to see that spectacular notes.csv file :)

TcH

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Re: Collections & Transparency
« Reply #13 on: December 28, 2012, 10:18:53 AM »
I am also curious about defaults and how best to handle them.  Maybe start a new thread.

I currently have over 500 notes almost 2 years with 1 default and none in any other bucket except issued or current.  My assumption is DanB sells notes on Folio like I do.  I dump them as they enter grace period.  I can see that almost 90% of any note I sell in Folio default and are charged off.  I currently have sold a total of 28 notes at a average discount of 20% off the principal left at the time of sell.  My average loan is a C to D range so I am on the riskier side.  I know this default rate doesn't correspond to LC averages so don't ask me why.  I don't have a good answer yet.

I wonder if this is good or bad?  I also wonder if this is what DanB is doing? 

Now on a side note I do run one portfolio that has only A/B for about a year and I have not seen one note move to Grace. 

My conservative XIRR is 8% and my aggressive is 13%.  I spend a ton of time on the aggressive so I currently don't know if the 5% is worth it? 

TRPeterson

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Re: Collections & Transparency
« Reply #14 on: December 28, 2012, 11:16:54 AM »
This has been a very interesting series of comments to read.  I'm primarily a Prosper investor, though I just started a very small LC cash account so I could learn their 'system' as well. 

As a Prosper investor, I cannot sell notes once they've become even one day late so I don't have the opportunity you LC investors do to dump a loan on it's way down the drain.  While I've played on Prosper with under $500 for 5 years, I only got serious in February 2012.  So with a 10 month old portfolio and about 1,200 notes I have 16 charge-offs.  Granted I invest in C-grade and lower mostly (closer to D-grade an lower on the LC scale).

IMHO it's more worth my time doing statistical analysis to improve my investing and forget about the one's who aren't going to pay.  My average charge-offs repaid 8% of their principal.  At $25 to $100 per note, it's seems futile to me to further concern myself with late notes.   Just my 2 cents.

You see in my signature I've got a pretty good return... but the 'youth' of my portfolio contributes to that.  We'll see if I'm eating crow this time next year with my lack of concern for charge-offs.
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