LendingClub.com has a similar problem. If you dig through their Prospectus, you realize this is a third party transaction where you have no direct recourse:

https://www.lendingclub.com/info/prospectus.action

“Moreover, member loans are obligations of borrower members to Lending Club, not obligations to holders of Notes. Holders of Notes will have no recourse to borrower members and no ability to pursue borrower members to collect payments under member loans.”

BEWARE!

well at last you didn’t get wrecked. Your biggest loss was probably time spent.

pretty cool stat tracker, kinda interesting the spammier sounding the loan title the worse of a problem it seemed to perform to be for you in some cases

“I can do all things through CHRIST and hard work”
“Anointed Ones”
“Got caught in payday trap when husband laid off”
“RE-ESTABLISH CREDIT AND GET BACK ON TRACK”

all defaulted

I have to admit I’m surprised
“EXPAND BUSINESS! LOAN VERY LOW RISK AND HIGH RETURN”
&
“AlWAYS LOOK ON THE BRIGHT SIDE OF LIFE”
did not (although they was rated higher than the previously mentioned)

it does look like you if you had stayed with the A and above stuff you’d might have been alright. But who knows that might not be true now in the new credit environment.

That recovery rate is absolutely abysmal. Makes sense I guess since you have little leverage to collect through something like Prosper and you are probbaly last on the totem pole behind bigger players they may owe money too. I imagine also it feels easier to welch on some small debt to some faceless entity online than to say the guy who turns your water off.

The illiquidity of the loans is what turns me off the most about the service.