And you thought there was never justification for that style of headline. Chinese P2P lender Jiedaibao is in hot water after a story about some of its lenders demanding female borrowers provide nude images of themselves as collateral, to be published online if the loans are not paid.
The report was published on Monday by the Chinese Southern Metropolis Daily (Mandarin), with the story slowly trickling into English sources from the obscure fintechist.com to Quartz.
The borrowers are typically college students and the loans are extremely high interest, sometimes as high as 30 percent. Various reports say that the creditors would release the photos either to the borrowers’ parents or online.
That report cites one student given the alias Li Li, who has borrowed 500 yuan (about $75) at a staggering 30% weekly interest rate. The sum exploded. The student asked for another loan at the same rate to cover the first (and the first loan’s interest). After defaulting on that, the lender demanded the nude collateral, which he then sent to her parents when she ultimately couldn’t pay back the absurd 55,000 yuan total loan.
It is easy to search and find lenders offering these kinds of loans on Chinese social media like Weibo, QQ and WeChat.
“Almost all lending platforms have a large number of middlemen in different cities to seduce students to borrow money,” Fu Jian of Yulong Law in Zhengzhou told Sixth Tone. Fu claims to have helped many students resolve issues with predatory lenders. “Students, sadly, are just the prey.”
This latest trend seems to be another exclamation mark on Sino P2P though. Chinese police took down Ezubao this past February and arrested 21 of its employees after accusing them of a Ponzi scheme scamming about $7.6 billion from approximately 900,000 users for projects listed on its site, over 95% of which were not real according to police. Another P2P lender, whose name Easy Richness sort of just oozes snake oil, is also being investigated for a Ponzi operation. They’ve already raised a whopping $1.6 billion from Chinese investors. Last year, P2P firm Dada Group also fell into police crosshairs for its business.
P2P is under heavy scrutiny in other countries as well, though not to the extent it is in China. San Francisco-based Lending Club is now beating back bad press over the alleged improprieties of its founder and now former CEO Renaud Laplanche. Similar varieties of fintech companies and social lending platforms are suspected by many people to be scams.