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”

Outlier OpinionsMakers

Member Exclusive, Online Lenders

As Feds increase fintech scrutiny, experts outline a BNPL regulatory framework

  • After experiencing a meteoric rise in recent years, the BNPL industry is bracing itself for increased regulation in the US as government agencies are looking to widen their oversight into the fintech sector.
  • With concerning signs regarding credit quality, risk intake and its effects on consumers, industry experts are advocating for more regulations and offer recommendations of what these could look like.
Iulia Ciutina | May 04, 2022
Member Exclusive, Online Lenders

Lending Briefing: BNPL regulation and the growing digital lending market

  • The BNPL market needs more regulatory oversight in order for consumers to be protected, new research suggests.
  • The fast-growing BNPL industry exists in a legal gray space and mostly consists of subprime borrowing, and pure players are yet to demonstrate profitability.
Iulia Ciutina | April 27, 2022
Online Lenders

Deserve’s CEO on the fintech’s new corporate credit card as a service offering

  • White label commercial credit is blooming, aiming to help companies serve other businesses by giving them easy access to capital. In our latest briefing, we spoke with Deserve's CEO Kalpesh Kapadia on the fintech's new commercial platform.
  • In other developments, community banks are partnering with crypto lenders - selling loans to a crypto trust and converting the cryptocurrency in fiat dollars to continue writing more loans.
Iulia Ciutina | April 18, 2022
Online Lenders

This week in lending: 2021 BNPL results, credit markets poised for growth this year

  • US BNPL players are pursuing aggressive growth strategies, but underlying performances are beginning to surface some concerns in the market.
  • After the pandemic made lenders cautious, credit markets have opened again in 2021, thanks to positive economic signs from borrowers.
Iulia Ciutina | March 18, 2022
Member Exclusive, Online Lenders

Lending Briefing: 2021 BNPL results, C&I lending picking up again

  • US BNPL players are pursuing aggressive growth strategies, but doesn’t necessarily mean healthy growth - underlying performances are beginning to surface some concerns in the market.
  • In commercial and industrial lending, volumes are picking up for the third consecutive quarter since the onset of the pandemic.
Iulia Ciutina | March 16, 2022
More Articles