China’s P2P Lenders Stoop to New Low in Demanding Nude Photos as Collateral

(YicaiGlobal) June 16 — China’s peer-to-peer lenders are demanding nude photographs of women borrowers as collateral in a new low for debt recovery tactics.

P2P lending platform Jiedaibao has been accused of offering microloans to female college students in exchange for photos of themselves naked. The threat, of course, is that if they do not repay the loan the image will be published on the Internet. Jiedaibao has denied direct involvement.

As the number of defaults on personal P2P loans has risen, debt collection agencies have proliferated. Such businesses are making a fast buck charging 30 to 50 percent of the total loan amount. Promise China, a Shanghai-based ‘debt collector,’ became the first to list in China last October when it joined the New Third Board, the country’s over-the-counter market.

Other aggressive debt recovery measures include nuisance calls to borrowers, their relatives and friends, putting up borrowers’ photos in public places, and posting their ID card numbers, phone numbers and addresses online.

P2P lending sites have become the most risky financing platforms in China, and several have gone bankrupt this year, resulting in total losses of more than CNY150 billion (USD22.8 billion). The danger is far from over. As of the end of March, there were about 3,984 P2P lenders, many of them exposed to mounting risks.

The risks associated with Chinese financial firms including P2P sites are largely attributable to the absence of a national personal credit information system. The central bank is setting up a nationwide credit system similar to the US’s FICO Score, but it has not yet been decided whether the credit system designed for banks will be made available to P2P lenders.

In an April report, Boston Consulting Group described China’s personal credit market as one that “emerged at the right time and is gradually taking shape, but still has a long way to go.”