Virtually every business in existence has complaints against it. That's true for bad businesses especially, but even good ones get them too. If you do enough transactions, sooner or later there is going to be a conflict between company and customer. Do enough transactions, and there will be several.
Peer-to-peer (P2P) lending sites have been coming up quickly in the last few years, and some are quite successful. Prosper is an excellent example of a generally well-regarded P2P site. But there are even Prosper complaints out there.
Let's take a look at some of them showing up in more common locations.
What the Better Business Bureau Reports on Prosper
The Better Business Bureau (BBB) is always the first source to check out when you're looking for complaints against any business. It's probably the most respected such source in the US, and it also serves as a platform in which consumers can file complaints that will be addressed by the company in question. That makes it more of an equal exchange than people simply slinging mud at a company where they had a bad experience.
With that in mind, BBB rates Prosper with an A+ – Excellent – on a scale of A+ to F. Prosper has been accredited by BBB since November 2012.
BBB had this to say about Prosper:
“BBB has determined that Prosper.com meets BBB accreditation standards, which include a commitment to make a good faith effort to resolve any consumer complaints. BBB Accredited Businesses pay a fee for accreditation review/monitoring and for support of BBB services to the public.”
When you are executing many thousands of transactions over the course of a year, there are bound to the breakdowns and misunderstandings that will result in consumer complaints. But a company's willingness to address those complaints to the satisfaction of the consumer is a very positive sign that the company values its reputation. BBB is stating that Prosper “makes a good faith effort to resolve any consumer complaints”, and that's all you can ask for.
Specific factors cited in Prosper’s BBB rating include:
- Length of time business has been operating.
- Complaint volume filed with BBB for business of this size.
- Response to 164 complaint(s) filed against business.
- Resolution of complaint(s) filed against business.
The third factor seems especially relevant. Prosper has had 164 complaints filed against it through the BBB – but it is also had at least 250,000 customer interactions since the business began operating in 2005. 164 represents some fraction that is ridiculously lower than 1% of all customer interactions. On that score, we have to acknowledge that Prosper comes up smelling like a rose.
The complaints are categorized as follows:
- Advertising/Sales issues, 53
- Billing/Collection issues, 38
- Delivery issues, 1
- Guarantee/Warranty issues, 3
- Problems with Product/Service, 69
I spent some time sifting through a large sampling of the complaints filed under advertising/sales, billing/collection, and problems with product/service, mostly looking for patterns of consistency in the complaints.
Complaint patterns are apparent, and fall into three categories: origination fees, credit reporting issues, and deducting a monthly payment more than once.
Origination fees are common complaints with P2P lenders. Almost all charge them, but borrowers don't seem to understand or realize what they are. Having a reasonable level of experience with P2P lenders, we can't count origination fee complaints against Prosper. They make it clear on the website that these fees are charged. But be that as it may, in most instances Prosper did return the origination fee in question to the borrower upon dispute.
Credit reporting issues are a legitimate complaint, and a certain number will happen with all lenders who report to the credit bureaus. It's unfortunate, but it happens. And it seems that Prosper worked to correct those situations, and the corrections were accepted by the borrowers.
Deducting monthly payments more than once is a more complicated problem. There are several complaints against Prosper for this, and it seems to be an area where they need to make improvements. In each case, they returned the excess payment. However, a double collection of a monthly loan payment causes a series of other missed financial transactions, that can result in non-sufficient funds charges by banks, and bounced checks and payments to other parties. Even if the financial side of the problem is fixed, the damage done to reputation is not easily remedied.
The double deduction of monthly payments is a problem that Prosper needs to address in a very deliberate way.
Prosper According to Complaint Websites
It often seems that when someone has an ax to grind with a company, they simply set up a website designed to act as a sounding board to air their grievances against said company. It's actually a very rational response to companies that have little interest in customer satisfaction or in dealing with complaints. And there are more than enough companies out there that fit that description.
As you might expect, there are certain such sites on the web. One of them is Prosper.PissedConsumer.com. Let's give the founders of that site credit for making their mission absolutely crystal clear!
The website offers the following statistics: 0 issues resolved, 23 reviews (I only counted 19) , $250,000 claimed losses, $35,600 average (I don't know exactly what that means), and 10,000 views. As was the case with BBB, there was little consistency to the complaints, other than people complaining that they were getting bogus pre-approval letters, and some saying that they were charged higher interest rates than they were promised.
There were two complaints on this site that actually did raise some concern on my part. One was from an investor who challenged Prosper's stated interest income figures. He said that his own experience was lower than what Prosper indicated, and worse, that the returns continued to drop the longer that he invested on the site.
Another complaint listed that I had not seen before was a borrower who claimed that Prosper used a lower credit score than what he had from the credit bureaus to charge him a higher rate of interest. It might be something to look out for!
On balance, the article that list prosper complaints are quite reasonable. The six most common complaints include some loan applications are denied, interest rates can be too high, loan payments can be expensive, Prosper calls too much (like when you miss a payment), and Prosper loans are unavailable in my state. All are common complaints against any lender, not just Prosper.
But the most interesting is number 6 – Is Prosper a Scam? No doubt that some people who have bad experiences will claim exactly that. But the writer of the article refutes that claim, citing the willingness of large investors to put up money on the platform. His conclusion: Prosper is Legit.
Evaluations From Respected Sources
These days you can find evaluations on just about a business on Yelp, including P2P lending platforms. I checked out Yelp San Francisco – Prosper's home town, and 17 reviews came up.
There was more of a consistent pattern to the complaints on Yelp than elsewhere. The most common is poor customer service/communication. There were also several reviews that gave the company a good rating.
But there were several that were at least a little bit unsettling. Several are from investors, and all were indicating that Lending Club is a superior investment platform to Prosper. I'd be willing to bet that a similar set of reviews in regard to Lending Club might say the same thing in reverse.
In a formal review of Prosper as in investing platform, InvestorJunkie.com owner Larry Ludwig relates his hands-on experience with the site. He reports a similar advantage to Lending Club over Prosper from an investment standpoint:
“Prosper loans are slightly riskier than Lending Club. This is based upon doing the number crunching I did on LendStats.com.”
Since Larry is known for providing some of the deepest and most objective product reviews on the Internet, I take this observation seriously. Larry isn't dissing Prosper – he's just pointing out that his experience and that verified with LendStats.com shows Lending Club to be the better of the two platforms from an investment standpoint, if only by a small margin.
Yet another well-respected website, Nerdwallet, did a review on Prosper late in 2015, focusing primarily on the lending side. The review is generally positive, but offers the following conclusion:
“Keep in mind that its personal loan approval process is more complicated than companies that fund loans with their own money rather than through individual investors. Prosper usually serves borrowers with good credit profiles. If you have a good credit history, you might have cheaper options, such as 0% interest credit cards or secured personal loans.”
That conclusion gives at least some credibility to the reviews on Yelp and elsewhere that indicated issues relating to customer service and communication, as well as credit levels. You can see our full review of Prosper to get more details about how the company works.
Putting Prosper Complaints into Perspective
Considering how many business transactions Prosper handles in any given year, the number of complaints against them – from various sources – is surprisingly small. We have to say that on balance this is an excellent company to do business with.
But there are certain complaints that seem to come up on a fairly consistent basis. The biggest may be that the platform isn't quite as good with investments as its primary competitor, Lending Club is. Deducting multiple payments from borrowers accounts, as reported on the Better Business Bureau, is also worthy of concern. There were also a fair number of people who complained about poor customer service and a lack of communication.
None of these occurred in sufficient numbers to shoot up a red flag. But they are worth paying attention to, and dealing with should they become a problem in working with Prosper.