I've already mentioned I've grown disappointed with Prosper.com and will not be lending any more money through there. I've noticed now that they have added a new feature called "Community Payment" which I'm not sure I like. The concept is simple: if a member of a group is behind on payments, other group members can chip in and make a payment on the overdue loan. This helps keep the group's rating up by cutting down on the number of late loans the group has, which can scare away other lenders from that group.
As a lender, I should be glad for this. If the borrower can't pay me, at least someone else will. In fact, this has just happened. One of my loans is 2 months late and I received a community payment. The amount was only $1.43 and after all the late fees and service fees, I only get $0.21, which is still better than nothing (although not by much).
But on another level, I am against this idea. The point of Prosper, I think, is for people to help other people get back on their feet by lending them money. But part of getting back on your feet means learning and accepting fiscal responsibility. The community payment option gives borrowers less of a reason to accept that responsibility. I think it is also a huge source for potential abuse. If you find a group whose members tend to make community payments for others, why not join that group, borrow money, and default on the loan? The community payments will stretch out even further the amount of time it takes for a loan to go to the collection agency and thus, hurt your credit score.
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