Ok, so the claim is that someone these "Groups" lower the risk of lending to people because supposedly the Group Leaders will only let in people that will not hurt their reputations. How are we, the lenders, to be made aware of the reputations? I don't see any mechanism for that now (although the site has barely launched). Are we going to have to wait years before groups get real reputations?

As far as I can see right now, anyone can form a group so that they can get the Group Rewards, but there is no way to see if these groups are trustworthy.

For each group, you can currently see the number of loans outstanding, including the interest rate and amount. Presumably, Prosper will indicate which--if any--of these loans are in default once someone defaults.

PHD what are your thoughts on building an AA group VS a HR Group?

I'm not sure what value this would add. Membership in a group adds value if the membership signals something that cannot be inferred from other information in an individual's profile.

I see a successful group as being one that signals credit-worthiness beyond the letter grade through a history of lower than expected default rates. At this point, no group has such a history, and it surprises me that individuals are willing to share reward points (increasing their borrowing rates over 3% in some cases) to join such groups.

Hmm

Are you sure the "rapid-fire" bids you observe aren't just standing orders triggered by a favorable combination of borrowing rate and credit grade? The process you describe makes sense. If someone is known to be a savvy lender, then clearly it pays to follow in his footsteps. I don't see how it is related to groups, though.

How much an individual borrower pays to join a group depends on the level of reward sharing within that group. Check out some of the groups that have 0 or 25% reward sharing, such as the Achieve Greatness Group. Borrowers with credit grades of E or HR pay especially high fees for reward sharing in these groups. You can see the premium being paid by clicking on the loan, then comparing the borrower rate to the lender rate. Underneath borrower rate, it will say how much of the disparity is attributable to the group reward sharing program.

I'll study the group cost issue..... I need to compare in vs. out groups. I'll have to look at some of the funded loans and see if I can find patterns....


I guess for a guy like you, this place is nirvanna?

economics_phd is right, no borrower should join a group unless there is some sort of proof that being a member of the group will lend more credence to your promises of repayment.

What I'd really like to see is if the Groups could be scored on something like "Percentage Payments on Time" and "Number of Defaults" and have that show up right under the group name. I'd be way more likely to loan to an HR group if I could see that, historically, members of this group have made 90% of their payments on time.

What's the Prosper.com opinion on this?

Will you (Prosper) also be letting lenders rate borrowers/groups the way other sites let buyers rate sellers?

Econ PHD,

You mention that "membership in a group adds value if the membership signals something that cannot be inferref from other information in an individual's profile."

You also go on to question whether any group is worth the current price of the fees shared with the group leader.

These are really good points you have made. It would seem that, thus to now, groups are pretty worthless, and especially those which charge their members fees. I think that legitimate Alumni groups for Colleges make sense, since the borrowers and lenders know that some of their money is going to the school, and the lenders know that the borrower went to their school. Also, a group of friends that charges no group fee could be a great idea for lending in-between each other. Those are the only ones I am impressed with, at this point.

I started a group called "Birmingham Prosperers", that charges no fees. In fact, that is one of the two key precepts. It charges no fees, and it is for people in Birmingham, AL. My idea is that if/when Propser grows, lenders will want to target specific geographic regions, so a specific region/city might add some value. But, of course, Prosper itself could allow searches of lender locations, thereby rendering my group pretty useless... But hey, at least it wouldn't be a net negative, since it charges no fees!

Sincerely,

Jason