China tells financial services industry to wipe out online usury

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Chinese authorities are stepping up efforts to fight online usury, an issue sharply criticized by state-owned broadcaster China Central Television (CCTV) in its recently annual Consumer Rights Day gala.

According to an announcement (in Chinese) released Thursday by National Internet Finance Association of China (NIFA), online financial service providers including Baidu-backed Duxiaoman, Bytedance, and Rong360were asked earlier this week to conduct internal reviews of their practices. The government-led agency called for complete investigations by companies in the sector in order to eliminate access to “high-interest payday loan” on their platforms.

Online financial platforms were also requested to report non-compliant acts from their business partners, including violent methods of debt collection and invasion of privacy. An NIFA official stressed high-interest cash lending is “strictly forbidden,” adding that member companies should report the results of their inspections by the end of March.

A spokesperson from Duxiaoman responded by saying it does not have any payday loan business on its platform. Bytedance and Rong360 were not immediately available for comment.

The crackdown comes after the recent CCTV report named a list of online money lenders providing high-interest cash loans, dubbed “714 anti-aircraft missile,” to desperate borrowers. The name is a reference to the loan term, which can be of seven or 14 days.

Available through local lending platforms such as Rong 360, and Tiantu, borrowers are charged about 30% of the loan amount, while the rate on an overdue loan could be as much as 10% per day.

In one case, a woman surnamed Dong from Changchun in northern China’s Jilin province, accumulated a debt of RMB 500,000 (around $74,460), up from RMB 7,000 ($ 1,040) she borrowed three months ago. Dong, along with her family and friends, kept receiving harassing telephone calls from debt collectors, according to CCTV.

“Those loan practices are actually not protected by Chinese law and strictly prohibited by regulators,” Guangzhou-based lawyer Zeng Jie posted on social media platform WeChat. Zeng noted local courts only support loans with interest rates of up to 24%. He said that most debtors don’t turn to the courts for help because they are either afraid to do so or are put off by the red tape involved. Zeng called for more government action to be taken on companies offering illegal loans.

Shanghai police said Thursday it arrested nine people suspected to be involved in lending platform that administered illegal funds of almost RMB 1 million earlier this year.

NIFA’s Beijing branch announced Tuesday that it was launching a round of investigations into illegal lenders in the capital that didn’t have government licenses. More than 20 people, including lawyers and accountants, will take part in that probe, according to a report by publication Jiemian (in Chinese).

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