Shut the loopholes for lending traps

ACCORDING TO THE LATEST GUIDELINE on lending issued by the China Banking Regulatory Commission, online lenders are prohibited from approaching potential borrowers with a bad credit history and college students under 18. Legal Daily commented on Wednesday:

The financial regulators have good reason to place greater scrutiny on the country's burgeoning financial industry, which, as Chinese Premier Li Keqiang has pointed out, is vulnerable to risks ranging from bad assets and bond defaults to shadow banking and internet financing.

The move against lending to college students under the age of 18 is especially welcome as it has come at a time when women, especially young college girls, have become the victims of extortion, with lenders demanding naked photos for loans.

These so-called lending platforms normally request nude photos or videos from female borrowers as collateral for loans, and release them if the debt is not duly repaid. The father and other relatives of a young woman in Enshi, Central China's Hubei province, recently received nude photos of the woman when she failed to keep up with the payments on a loan. In the Enshi girl's case, it only took half a year before her original loan of 5,000 yuan ($725) snowballed to over 260,000 yuan due to the high interest rate.

The loan sharks' blackmailing and "promotional" tricks are illegal in every sense. And their preying on young women in need of money for college and other expenses is immoral.

Unaware of the latent risks of submitting their nude photos in exchange for what they think will be just a few thousand yuan, the victims often fail to see that the loan was never about extending a helping hand but luring them into a trap, in which they have to keep borrowing money to pay interest until the debt becomes too great to repay. In some cases the loan sharks refuse to destroy the borrowers' nude photos even after the debt is cleared.

Forbidding online lending companies from offering loans to the vulnerable is necessary, but there are still supervisory loopholes that may be exploited. Many college students at the age of 18 or older also lack the financial capability to repay their debts, and they might seek off-the-record loans from unqualified lending platforms via social media. Making lenders and borrowers conduct their exchanges through third-party platforms and under strict supervision might be the way to go to clean up the online lending market.