China’s scrutiny of online finance industry will end in tears for unqualified companies
Local authorities have until March to rectify any exposed wrongdoings
China will finish a nationwide inspection of its burgeoning internet microloan industry by the end of next month as the nation cracks down on cash loans and other irregularities, according to a document seen by the South China Morning Post.
Local regulators overseeing the peer-to-peer internet-finance industry are required to report their findings to authorities led by the top banking watchdog by the end of January 2018 and rectify any exposed wrongdoings by the end of March next year, according to a regulatory notice dated December 8.
After the crackdown, unqualified companies will see their licences revoked.
Local authorities have also been asked to report the rectification measures to the top regulators by the end of April, 2018, according to the notice.
The move comes just a week after the central bank and the top banking regulator issued sweeping new rules regarding the rapidly growing online micro loan business, which includes capping the maximum interest rate.
“The quick move to implement the rules since the December 1 crackdown on cash loans, reflects the efficiency and attention of the regulators on the issue,” said Yu Baicheng, head of the research institute of wdzj.com, which monitors the online lending market.
The latest rules set the bar higher on the qualification of licensed players, as provincial regulators have been also asked to thoroughly inspect the qualification of such companies in some major cities.
Local authorities will run on-site checks on the qualification of company shareholders, sources of funding and risk control.
Cash loans, also known as payday loans, are unsecured, short-term, micro cash advances offered to individuals who do not need to give reasons for the borrowings. It has taken off rapidly in China and market watchers have accused some “predatory” platforms of enticing young borrowers to roll on mounting debt that eventually spirals out of control.
Regulators say that this industry has grown so rampantly that issues such as “over lending, repeated credit extension, unregulated payment collection and extremely high interest rate charges and violation of individuals’ privacy” have emerged.