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April 12, 2017

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Online lenders barred from student loans

CHINA’S banking regulator said yesterday that it will prohibit online lenders from giving loans to students under the age of 18, in a bid to crack down on shady loans on campus and clean up the sector.

The China Banking Regulatory Commission will also ban online lenders from offering credit to people who are incapable of repaying, or extending loans with exorbitantly high interest rates to students on campus, according to its filing.

The move by the CBRC suggests a tighter control on credit risks in the online lending sector.

Online lenders have exploited the absence of regulations and the CBRC’s ban on banks issuing credit card on campus since 2009 to provide loans on campus, with students using the loans to buy smartphones, cameras and designer bags.

Some online lending platforms charged over 30 percent interest rate on the loans, and some even required nude photos from students as collateral. The legal ceiling for interest rate in the private lending sector set by the Supreme People’s Court in September was 24 percent.

“Most online student loan lenders would have to shut down or switch business focus following the tighter regulations,” said Zhang Yexia, a senior researcher with the Shanghai-based consulting firm Yingcan Group.

“Otherwise platforms have responsibility to vet student’s information, and sign written confirmation with their parents to ask them act as guarantors of the debts,” Zhang added.

More than 60 percent of Chinese university students borrow money from online services to shop or travel, according to a survey by China University Media Union last year.


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