People’s Daily Warns China’s Online Lending Platforms against Illegal Collection of Services Fees


The flagship newspaper of the Chinese Communist Party has published a news story warning online lending platforms that the collection of exorbitant services fees from borrowers is prohibited by law.

The story carried by the People’s Daily highlights a case where a loan of 88,000 yuan incurred a repayment sum 157,400 yuan, and multiple reports from consumers that financial platforms are charging real interest rates far in excess of those advertised, as well as above the maximum threshold of 36% for private loans as set by the Chinese supreme court.

Dong Ximiao (董希淼), vice-head of the Chongyang Financial Research Institute of Renmin University, said that some online finance companies were covertly charging abnormally high interest rates which breach legal thresholds and are exacerbating the burden on borrowers.

“The collection of services fees is in breach of regulations, and platform services fees should be included in interest calculations,” Dong said.

Dong said that platform fees can normally divided into interest fees and processing fees, but that if all fees were converted into interest fees this can translate into shocking amounts.

In order to avoid legal restrictions, some platforms are using information review fees, administrative fees and service fees to intentionally and covertly drive up real interest rates.

“At present fee collection lacks transparency, and it’s common for various traps to be set, while loan consumers in general lack discrimination.”

The “Notice Concerning Standardisation and Rectification of ‘Cash Loan’ Operations” (关于规范整顿“现金贷”业务的通知) issued by China’s Online Finance Risk Specialist Rectification Work Leadership Team Office and the P2P Online Loan Risk Specialist Work Leadership Team Office prohibits lenders from “deducting interest, processing fees, administrative fees or deposits from the loan principle in advance,” or “setting high-sum late interest, late fees or penalty interest.”