Chinese regulator tells unauthorised online lenders to stop offering loans at once
Warning from online lending watchdog is latest effort to crack down on microloan sector
The National Internet Finance Association of China issued a risk warning letter late on Friday telling “unqualified institutions” to stop offering loans immediately in the latest move in Beijing’s efforts to crack down on the microloan sector to fend off financial risks.
The 1 trillion yuan (US$151.5 billion) short-term, unsecured lending sector, known as “cash loan” in China, has been accused of charging exorbitant interest rates and violent debt collection practices.
In Friday’s warning letter, the Internet Finance Association, a government-backed industry group, said the unqualified micro lenders were disrupting the economic and social order and must stop lending immediately.
“Some institutions are not qualified to issue loans but have used false promotion to attract clients, conduct violent debt collection, and charge extremely high interest rates and fees, causing financial risks and social problems in some regions,” it said in the letter released on its website.
Qualified lending institutions should also increase their self-discipline, charge interest rates at a reasonable level, and increase information disclosure, the association added.
The companies are not allowed to conduct violent debt collection or harass unrelated people, it said.
China has started to take steps to rein in the loosely regulated lending market.
On Tuesday, a top-level multi-ministry body, set up by the central government to oversee the internet finance sector, issued an urgent notice to restrict the granting of new approvals for microloan firms.
Shares of US-listed Chinese online finance firms fell this week following the government crackdown.