Cracking down on predatory lending to university students
Chinese regulators have imposed new rules to curb lending to university students by Internet finance platforms with marketing campaigns that manipulate them into excessive spending and leave them heavily in debt and fall into the trap of loan sharks.
Microcredit firms are banned from extending consumer loans to university students, and institutions established without regulatory approval are not allowed to provide credit services for them.
The statement was made by the China Banking and Insurance Regulatory Commission (CBIRC), the People’s Bank of China, the Central Cyberspace Affairs Office, the Ministry of Education and the Ministry of Public Security.
Even licensed financial institutions such as consumer finance companies and commercial banks are required to strengthen their risk management for relevant businesses.
Lenders often provide credit on easy terms — capitalizing on a materialism prevalent among students — but tend to charge staggering interest rates and employ violent collection methods.
Universities are required to shoulder the responsibility of improving students' financial-security awareness, helping them establish reasonable spending habits, the statement said.
Authorities also vowed to intensify the investigation and punishment of illegal and criminal acts related to student lending.
In the next phase, the CBIRC said it will work with relevant departments to carry out investigations of illegal businesses, curb the practice of Internet platforms "harvesting" university students and safeguard the legitimate rights and interests of students.
The student loan problem has been going on for a long time, and the watchdog has unveiled a slew of measures to standardize the market over the past few years. However, malpractice still exists as the market is so vast and attractive, and many college students lack financial literacy and are easy to be coaxed by predatory lending, said Su Xiaorui, a consumer finance expert.
She believes the new policy will help prevent risks beforehand while showing more humanistic care toward students.