According to media reports, many university students use their own nude photos as collateral to borrow money from online lenders, which shows that part of the online lending market remains unregulated. Therefore, regulatory forces should renew their efforts to cleanse the market.
Online lending companies should be more strictly regulated not only because they have covertly lent money to college students, but also because many of them have used irregular and illegal means to make profits. For example, some reports say many online lending companies charge interest rates that are many times the normal rate of banks. In other words, they have engaged in illegal financial operation, or usury, which is a crime.
China allows non-banking private lending among individuals, but the interest rate should not be higher than four times the benchmark lending rate of banks. Chinese banks' benchmark one-year lending rate today is slightly more than 4 percent, but media reports say the rates charged by online platforms are often more than 30 percent a year. Such a high interest rate, plus various other charges and fees, ultimately become an unbearable financial burden for reckless students who borrow without due consideration.
Another problem with China's online lending platforms is their low threshold for loans for college students. In many cases, applicants only need to provide their ID and contact details of their families to get a loan approved. By offering an easy application procedure, those online lending companies essentially coax students to borrow, a practice that is in stark contrast to the prudent operation of regular banks. And after the students run out of means to get the money to repay the loans, the companies come down on them like mafia, which also often breaches the law.
Obviously, such lending activities are illegal, and the regulatory authorities have failed to act promptly and forcefully, which has led to more tragedies.
Students who have recklessly borrowed through those platforms certainly should be responsible for their actions. But regulators should not sit idle to allow the situation to worsen. If the banking and public security departments had more closely monitored the industry and severely punished those involved in usury and other illegal activities after the Henan student committed suicide in March, the Guangxi student might still be living and the female sophomore would not have used her nude photos as collateral to take a loan.
By Xin Zhiming
The author is a senior writer with China Daily.
