Salon has an article on peer-2-peer lending such as  They claim the benefits as such:

If you give $50 to 100 people who have a credit grade of C, chances are that over the course of three years, some people — about three, according to Experian — will default on their loans. But if you get a 14 percent return on your money from those who do pay you back, you'll make more than $1,000 on your $5,000 investment, enough to cover your losses.

It sounds great, but in reality what happens is one person fills out a profile and is given the cash that is fronted by the lany lenders.  The above scenario only works if you compare P2P lenders like with statistics gathered through B+M (brick and mortar) lending facilities.  The numbers don't add up when you introduce electronic crime.

With identity theft on the rise, someone could make an easy $5,000 by posing as an individual they are not and getting the loan for that amount.  It only takes a few attacks like, resulting in higher fear, to bring down web sites like Prosper.

BoingBoing also covered this story.