Online Lenders

Back at it again, another Chinese P2P lending scandal

  • After years of keeping its distance, China's policy toward P2P lending has changed dramatically.
  • The government is shutting down failing and fraudulent P2P lenders.
close

Email a Friend

Back at it again, another Chinese P2P lending scandal

Online lenders in China just got a bit more cautious, as the country’s government seized $1.5 billion as a result of negligence in P2P lending throughout the country.

How big a deal is it?: This fraud is suspected to be widespread, as over 100 executives and 380 companies are currently being investigated.

Unfortunately, this isn’t the first time there has been scandal in the country’s p2p lending space. P2P lending in China is part of a rare, privatized industry in the communist country, and had been open to new businesses without much government oversight. There were 3,500 P2P lenders in the country in 2015.

Not the first crackdown rodeo: In 2016, Chinese police raided P2P lending giant Ezubao after it collected $9.14 billion from investors in what would later be identified as a Ponzi scheme. As a result, China noted it would refrain from approving new online lending platforms in the country for the time being.

Tight-to-open, the US strategy: The US P2P lending market began with two contenders, Prosper and Lending Club. Since then, the SEC has approved firms like Funding Circle and Upstart, which provide P2P investment options to accredited investors via Regulation D of SEC regulation.

Lending Club CEO Scott Sanborn has noted his distrust of the Chinese P2P marketplace and its Wild West mentality of lax regulations and open markets.

“In the US, there’s not a specific regulatory framework for our business model. We are fitting into the existing regulations, which existed to protect the lending side as well as the investment side. It’s not a perfect fit,” he said.

“As a result, there are not many platforms like us in the US. But in China, things were essentially open, which brings an incredible number of up to 6,000 online platforms. That’s two pretty different approaches.”

0 comments on “Back at it again, another Chinese P2P lending scandal”

Online Lenders, Podcasts

Zest AI’s Mike de Vere: ‘You don’t have to give up economics to be more fair’

  • Machine learning and AI models are changing the face of lending.
  • They're able to clarify the tradeoffs between fairness and economics and optimize them.
Zachary Miller | September 08, 2020
Online Lenders

How Fiserv’s partnership with VMware enabled it to launch a PPP application in 8 days

  • Time was of the essence for SMBs when the Cares Act was announced.
  • The two companies stood up a PPP app that was responsible for distributing $1.4 billion in PPP loans.
Zachary Miller | September 04, 2020
Online Lenders

‘No knee-jerk reactions’: How LendUp quickly adapted to be resilient during the pandemic

  • Anu Shultes is a cancer survivor with 25 years experience in financial services.
  • She brings her own personal resilience to the challenges her firm faced during the pandemic.
Zachary Miller | August 20, 2020
Online Lenders, Podcasts

Earnest’s David Green on student lending in today’s economic environment

  • The pandemic's impact is being felt on the student lending side.
  • Earnest's chief product officer David Green joins us to discuss how to help students pay for school.
Zachary Miller | July 31, 2020
Online Lenders, Podcasts

Upstart’s Paul Gu: ‘AI is a mindboggling change in the economics of lending’

  • Upstart's lending models have been shown to expand access to capital without taking on more risk.
  • The fintech firm is rolling out a new auto product in addition to a credit decisioning API.
Zachary Miller | July 29, 2020
More Articles