China investigates fintech firm 51 Credit Card for harassing borrowers in latest crackdown on peer-to-peer lending market

23-Oct-2019 Intellasia | South China Morning Post | 6:02 AM Print This Post

Chinese fintech firm 51 Credit Card is being investigated by police for employing underhand tactics to chase delinquent borrowers, showing resolve by authorities to clean up the peer-to-peer lending industry.

The Hong Kong-listed company, which operates a credit card management app that matches borrowers and lenders for small loans, hired external debt collectors who pretended as government officials to threaten borrowers, police said in a statement on its Weibo social media site late Monday.

The probe marks another high-profile clampdown on China’s online lending business, as Beijing tightened its oversight on the shadow banking industry that is becoming a hotbed for Ponzi schemes. In a move to curb malpractices in private lending, China’s top court on Monday spelt out the details of what constitutes illegal lending and acts that amount to severe violation of the law.

Police in the eastern city of Hangzhou, where 51 Credit Card is based, have received many complaints about the company since September, it said. The company is suspected of “picking quarrels and provoking troubles” according to initial probes, according to the statement.

“Our lack of training and oversight on partner companies has led to some radical behaviours in the communication with our borrowers, and it hurt certain borrowers,” chair and chief executive Sun Haitao said in a statement on Tuesday. “We are very sorry about that.”

Its core business is operating normally and the company has enough cash and assets to protect the rights of lenders and investors on the platform, Sun added. Its assets are not being frozen, the company said.

Shares of 51 Credit Card rebounded 13 per cent to HK$2 at the close of trading in Hong Kong on Tuesday. They had plunged 35 per cent to HK$1.77 on Monday afternoon, following news reports of a police raid of its Hangzhou office. The company had earlier confirmed “an on-site investigation” by authorities on Monday.

In a new stock exchange filing, the company said it has fully cooperated with the investigation. It also denied rumours that the company has leaked or stolen personal data from users.

Sun and chief financial officer Zhao Ke are assisting the authorities in the investigation and they have not been detained, the firm said.

Founded in 2012, 51 Credit Card now has 83 million registered app users and managed over 138 million credit cards, according to its September interim report. It has over the years expanded into peer-to-peer (P2P) lending business.

Some 6,000 such lending platforms have defaulted on payment, with operators absconding with cash or shuttering operations as of end September, to data provider Wangdaizhijia. They put at risk 214 billion yuan of cash from 2.7 million lenders, who usually are mom-and-pop investors.

51 Credit Card generated 57 per cent of its revenue in the first half of this year from the lending business, according to its financial report. It facilitated 13.8 billion yuan worth of loans through its platform, up 6.5 per cent from the same period in 2018.

https://sg.news.yahoo.com/china-investigates-fintech-firm-51-050035658.html

 


Category: China

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