Last time I checked, btcJam is strict on the details of the borrowers there, so I think faking details would be hard unless you are good at it. On the part of arbitration, even if you have the power to legally pursue any party who defaults a loan, if it's a small sum and the defaulter is from another country, it will basically be useless.
I have only lent some coins before the whole arbitration thing was in place and even though the borrower had A+ rating, he got away pretty easy.
It was a small sum and arbitration didn't affect it as it didn't go back that far in retrospect. I haven't really dared to invest since then. And now, I don't have a guarantee on my money just on the fact that I will be given the borrower's information. Well, little thin.