Financial Structure of Prosper Loans
According to the prospectus issued to investors on July 13, 2009, Prosper notes since relaunch are obligations of Prosper Marketplace and not of the original borrower. Prosper promises to pay the noteholder ("investor") the funds it receives from the underlying borrower. Noteholders of Prosper's "member payment dependent" notes are considered unsecured creditors of Prosper Marketplace with limited recourse against it. The Prospectus states that in the event Prosper becomes insolvent or declares bankruptcy, investors in Prosper notes may lose all or part of their investment even if the underlying borrower continues to pay. Investors' recourse in the event borrower-supplied information proves incorrect for any reason is also "extremely" limited. This structure is identical to that adopted by LendingClub after SEC registration.
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