Peer-to-peer lending platforms in China will have their details recorded by the country’s Central Bank credit system in a bid to tighten the guidelines in the financial and digital credit spheres in the country.
The new directive to tighten the regulations is part of the country’s efforts to mitigate risks, frauds, and other financial crimes within the online lending platforms.
In a statement with the headline “Notice Concerning Strengthening P2P Online Lending Sector Credit Systems Establishment,” the new instruction requires all peer-to-peer lenders to submit their details to the Credit Reference Center of the People’s Bank of China (PBoC).
The rule requires online lending firms to disclose their information including online lending rates, to the appropriate finance agencies, organizations, and databases. Besides, P2P online lenders are required to furnish Baihang Credit with relevant information. Baihang is China’s officially licensed and recognized personal credit agency.
The licensed agencies will collect details of P2P online lenders regardless of whether they are operational or not. The guidelines also come with fresh penalties for defaulting borrowers. Te penalties will include, among others, higher interest rates on loans as well as limits to accessing loan and insurance services.
Saving the Ailing P2P Lending Economy
In the recent years, China’s P2P lending industry has been ailing from various financial malpractices. A common example includes defaulting borrowers, which is one of the main reasons why the regulators have decided to reinforce the institution of the credit system for the P2P lenders. With stricter rules in place, the lending firms will enjoy protection and eventually reduce the unnecessary risks.
Speaking about the new rule by PBoC, the dean of Internet Finance Law Research Institute at China University of Political Science and Law, Li Aijun, said:
This move could reduce the risk of control and operation costs of online lending platforms, and protect the rights of Lenders.”
According to the notice, China supports credit reference agencies to access Peer-to-Peer online lending platforms and collect, maintain, process, and distribute credit data to third parties based on the laws and regulations.