Posted by Peer-Lend on September 17th, 2008
The new wave of Peer to Peer Lending providers allow ordinary citizens to lend and borrow money with one another, online, in a convenient, secure and legally compliant manner. But is there a way to leverage this new financial service by combining it with a highly networked (and highly internet savvy) political support structure?
We present 2 potential synergistic use cases for “Peer to Peer Campaign Finance” – plus a handy dandy flowchart outlining one example case.
Political campaigns, by ubiquitous necessity, collect the majority of their contributions via credit card. A contribution made via credit card is nothing but a “loan” made to the contributor by the issuer of the credit card, with the proceeds of the loan then being transferred to the campaign (or, if you’re charging lunch, to a restaurant). This type of loan arrangement does not appear to constitute a violation of the federal prohibition on making a contribution in the name of another person or allowing one’s name to be used to effect such a contribution – everybody does it, regardless of political affiliation, and has done so for years, and will continue to do so.
But, as often occurs, new technologies and new paradigms present… new opportunities. The advent of online Peer to Peer Lending makes it possible for individuals (or groups of individuals) to make similar types of loans to one another – without the mediation of a bank or credit card issuer. Given that the interest rates and payment terms on each loan can be set by the individuals involved, rates and terms are often more favorable than those offered by traditional credit providers, and, additionally, affordable credit can be directly extended to those who might not otherwise have access to it at the time.
- Case 1: Peer to Peer Lending as a convenient, fixed-rate, 36-month alternative to Credit Card contributions.
- Potential contributors sign up with a Peer to Peer Lending marketplace and request a loan.
- Individuals (including, potentially, fellow supporters of the borrower’s cause of choice) bid on the loan request.
- A loan is issued to the borrower at an interest rate set by the individual lenders who have bid on the loan.
- The borrower is then able to use the proceeds of their loan to make their chosen contribution.
- Borrowers repay the loan over a fixed schedule (normally 36 months) with a fixed monthly payment at an interest rate which was set by the individuals who bid on the loan, and which is not subject to change.
- Case 2: Peer to Peer Lending as a convenient means for indirect support of a particular cause.
- Individuals sign up with a Peer to Peer Lending marketplace provider to lend.
- Loan requests by borrowers who support a common cause with the lender are identified.
- Individual lenders bid on the loan requests of borrowers with whom they identify.
- A loan is issued to the borrower from the funds of the lender (or a group of lenders).
- The borrower is then able to use the proceeds of their loan to make their contribution.
- The individual lenders are repaid over 36 months according to the terms of the loan.
Flowchart example – one potential P2P Campaign Finance implementation, “
The Obama Loan“:
Think about that for just a minute. Happy 2008 Election!