Caixin
Mar 18, 2021 05:23 AM
FINANCE

China Bans Micro Lenders From Targeting College Students

A college student returns to campus March 16.
A college student returns to campus March 16.

China banned micro lenders from granting new online consumer loans to college students out of concerns over excessive consumption by students and bad social influence.

The ban strikes another blow against online microlending platforms, including Ant Group Co. Ltd.’s Huabei and Jiebei. A series of rules since November imposed more restrictions on the previously lightly regulated sector and led to the abrupt suspension of Ant’s $35 billion initial public offering.

In a notice jointly issued Wednesday by five government agencies including the China Banking and Insurance Regulatory Commission, the People’s Bank of China and the Ministry of Public Security, the regulators said some micro lenders have targeted college campuses and conducted marketing with the cooperation of technology companies. The campaigns induced some college students into excessive consumption on internet platforms and drew some of them into debt traps.

Although regulators have tried to crack down on microlending on college campuses since 2017, headlines about college students mired in enormous debt from buying luxury handbags and the like still appear.

The ban mainly reemphasizes previous supervisory rules on campus loans and focuses on strong implementation, said Xue Hongyan, director of the Internet Finance Center of Suning Financial Research Institute.

The notice does not prohibit licensed financial institutions from offering internet consumer loans to students, but it provides more detailed regulations, requiring traditional banks and consumer finance companies to strengthen pre-loan investigation and evaluation of student clients, identify the real purpose of loans, and make sure they have a second source of debt repayment.

The notice also requires universities to take responsibility for strengthening financial education and assistance for students, guiding students to establish a grounded conception of consumption, and effectively safeguarding students’ rights and interests and campus stability.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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