Peer-to-Peer Lending Websites

Question

There are websites (such as Prosper.com or LendingClub.com) which allow laypeople to lend money to borrowers with interest.

For example, a typical listing posted by a potential borrower is one in which he submits to a credit check by the website and self-reports the reasons necessitating a loan and how he plans to pay back the money. Based on his credit rating and a bidding strategy by the borrower (who may offer a higher rate in order to ensure full funding of the loan), an interest rate is set. Rates offered typically range from 7.5%-30.99%. Thus, one may ask for $10,000 at 15% annually over a three-year period in order to consolidate one's loans or build an extension on one's home. The facilitating website may then take 1% off of all payments as a service fee.

Potential lenders can then browse the various listings on the site. After seeing a listing, a lender can offer to fund part of a loan. For diversification purposes, lenders typically offer only between $50-$200 toward any one loan. Once the full amount of the loan has been funded by the lenders, the loan goes through. I believe the borrower executes a loan agreement with the facilitating website, which then distributes shares to the corresponding lenders. The borrower will then make monthly payments of principal and interest and this will be distributed to the lenders' accounts. If a borrower defaults, the lenders will not receive any more payments. The loan will be sent to a collection agency, and if they recover anything, the recovery amount (minus substantial collection fees) will be given to the lenders.

In order to avoid various issues (violence, violation of privacy, etc.) lenders and borrowers use usernames and are completely pseudonymous.

In light of this, would it be permitted for a Jew to utilize this site as either a lender or borrower? The major concern would be lending to a Jew with interest or borrowing from a Jew with interest. However, one does not know whether the borrower or lender are Jewish, and on a global scale, or even in the United States, the chances of a random person on the internet being Jewish are rather slim. Additionally, maybe there is room for leniency on account of the fact that someone else will lend the money no matter what you do. I don't know how useful these retorts are, which is why I am posing this to community.

Answer 1

I once asked the Business Halacha Institute whether I can lend on LendingClub, and they said it is permitted, since you can assume the borrowers are non-Jews.

I asked another rabbi, and he said you shouldn't lend to a large number of people at once since then it's likely that one of them is Jewish. Since approximately 98.3% of the USA is non-Jewish, this would mean you shouldn't lend to 41 people at once. (Unless even less than a rov would be a problem.)

I assume the business halacha institute holds you evaluate each loan on its own and can follow the strong rov that it is permitted, without worrying about statistics that say one of them might be Jewish. But assumably you can just space out the time that the loans are offered to avoid any issue.