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”

Member Exclusive, Online Lenders

How Shopify is creating an ‘embedded finance ecosystem’ with Shopify Capital

  • Shopify merchants benefit from a quick, simple application and approval process.
  • Shopify is slowly building an arsenal of finance solutions to better serve its users.
Shehzil Zahid | June 10, 2021
Member Exclusive, Online Lenders

‘Fix the errors and a lot more people will flow through the system’: The credit ecosystem may need a makeover

  • Credit invisibility is still very much alive in the U.S.
  • But it may not be just one problem within the system that’s causing the mess. Rather, it could be the whole system.
Rivka Abramson | June 07, 2021
Member Exclusive, Online Lenders

Through software, Drummond Community Bank moves into personal and auto lending

  • The bank will provide its customers with AI-powered personal and auto loans.
  • AI-based lending platforms can give community banks a competitive advantage over larger banks.
Ismail Umar | May 10, 2021
Member Exclusive, Online Lenders

With the cannabis market set to double, lenders hope to capitalize on the opportunity

  • Financing in the space typically has come in the form of equity investments.
  • Federal deregulation would give more lending options to cannabis businesses.
Shehzil Zahid | May 05, 2021
Member Exclusive, Online Lenders, Podcasts

‘We see a lot of whitespace in credit cards for near prime customers’: Avant’s James Paris

  • Avant was one of the first digital lenders.
  • Almost eight years later, CEO James Paris is leading the company into new financial products.
Zachary Miller | December 21, 2020
More Articles