China bans online student loans in best interest
In its toughest decision yet, the Chinese government banned peer-to-peer (P2P) online lending to college students, an unregulated industry that targets students with fake ads and leaves them with high debt. to maintain their excessive buying habits.
South China Morning Post reports that only a few banks will be allowed to grant credit to academics, according to a joint directive from the China Banking Regulatory Commission, the Ministry of Education, and the Ministry of Human Resources and Social Security. A copy was posted by the Jiangxi provincial government on its website last Friday.
Shanghai Strengthens Stranglehold of Online Lenders As Scams Rise https://t.co/T85oAzp2Lm pic.twitter.com/XWvtdaWT67
– SCMP News (@SCMPNews) June 1, 2017
The crackdown is for the sake of the students, said Zhao Xijun, a finance professor at Renmin University in China.
“Even though some financial institutions are approved to handle so-called campus loans, their financial products may not be suitable for university students, whose risk awareness is not strong and the ability to repay the money is limited,” he said. Zhao said.
“The directive’s strict measures can become a basis of punishment for future offenders. “
The crackdown comes amid heightened concerns about the effect of P2P loans on college students with low financial literacy. Students have been reported to be using these businesses through websites and apps like Fenqile to fund small loans so they can afford to buy smartphones, pay for vacations, or get the latest sneakers. .
Last year, Beijing capped the maximum amount people can borrow on these P2P sites at CNY 1 million.
In its latest assertion of control over the largely unregulated industry, lenders with existing student loans will also need to present a company exit schedule, according to the government directive.
More cases revealed of naked IOUs of Chinese college students https://t.co/fl9GQrOzRi pic.twitter.com/dU1HdCm4iu
– SCMP News (@SCMPNews) Dec. 7, 2016
BBC notes that a microfinance portal called Wangdaizhijia lists at least 500 of these platforms, although the exact number is unknown.
Students who have used these sites fall prey to exorbitant interest rates from regulated banks and resort to scrupulous practices such as requiring borrowers to send nude selfies as collateral. Defaulters are left with growing debt and more than 100 of them had their nude photos and contact details leaked online last December, SCMP reports.
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