Proper law can streamline e-loan platforms

A series of scandals involving online financing platforms, including Fanya Metal Exchanges, Ezubao and Dada Group, have come to light in recent times. These former online financing services are under investigation, and investors risk not getting back their assets worth hundreds of billions of yuan.

For instance, Ezubao, or e-loan service which was set up in July 2014, allowed users to buy its financial products on the Ezubao-developed app for smartphones on an annual interest rate of 9 to 14 percent. The interest rate was a clear sign of its risky activities, because it was much higher than that of general financial products and the average profit rate of most enterprises. To put it simply, the return rate promised by the e-loan managers was too high to be true.

E-loan has other problems, too. Most peer-to-peer, or P2P, loan platforms trust their money to banks or other third-party payment institutions, which makes their funds secure because of external supervision. But e-loan companies simply save the money under their own account without external auditing. Besides, unlike most P2P loan platforms that serve small- and micro-sized enterprises, e-loan companies prefer to issue big loans, whose risks exceed their capacities.