Sigh...
See dude, that's the whole point. People fall all over themselves thanking BTCJam for their help, and now it somehow legitimizes their operation. Or that they're doing a better job. It is, certainly, better to get paid something for your investment in a loan. But its not just about protection from scammers, no one thinks about what kind of position Jam (or any other similar platform) is in when they provide these loans.
When a loan gets submitted BTCJam requests much more information from the borrower when they apply for the loan, than an investor, understandably. But then a loan becomes late, people start dumping notes a huge discount, then it becomes overdue, people start dumping notes at an even bigger discount. All the while, Jam, who has already collected their fee when the loan was funded, now has the ability to sift through the documentation provided by the borrower and determine with much more certainty than any investor ever could on that site ever could whether that borrower has the assets or the ability to pay off that loan regardless of whether a judgment was put against that borrower or not. Pursuing litigation is great, but if there are no assets, the lender will still be left with nothing. So now that investors are fucked, Jam can sit back in a position of leverage and cherry pick notes from defaults that they can scoop up at highly discounted values off investors who don't have the information to accurately assess the value of these notes.
Has BTCJam debt collections ever announced beforehand that they would be buying notes on a given loan? If your answer is no, have you ever wondered why? You bet your ass I would price a note much higher to an individual or entity who had a superior ability to assess the value of that note than myself.
So, the investor is left with the option to to pay a lawyer to find out the information that jam already SHOULD have. What was that fee for at Jam then?
BUT NOW THAT YOU ALL KNOW THAT BTCJAM DEBT COLLECTIONS ARE BUYING NOTES FOR DEFAULTED BORROWERS HOW ABOUT YOU START PRICING NOTES AT VALUE MINUS 5% FEE THAT JAM ALREADY COLLECTED WHEN THE LOAN WAS FUNDED. That seems fair right? You are, after all, not selling to another investor, who if they wanted to collect would have to pay someone else to find out the same information that jam already has which is what you would theoretically be paying that fee for, to provide an accurate credit rating.
It really is a great business model that they have.
I can't completely blame Jam. If they did give out all of that info, borrowers would surely balk and there would be another site without such restrictions where they would go and investors chasing returns would then flock to that site.
Nothing will change until people demand better. I like the idea of crowdfunding loans, but this system is broken, severely. As others have said, posting collateral is an option, and it is certainly sound, but no provider of a platform will provide such an option if the competitors don't and the investors don't seem to mind.
I just want to say that this explanation is exactly how I view it. I haven't personally heard of anyone being tracked down/sued/etc. by BTCJam, despite the massive number of scams there. That in itself should speak wonders.
IF you invest there, you have to do it as just that -- an investment. Not a loan. Expect to have x% of them defaulted on. You just have to hope that the ones that don't default earn enough to compensate for those that do (it's akin to diversifying stocks -- you don't care if a couple tank, you care if the batch, as a whole, are positive).
