December 1, 2017 / 11:48 AM / a year ago

China cracks down on cash loan firms with new rules - sources

BEIJING, Dec 1 (Reuters) - China’s financial regulators on Friday circulated new regulations to local governments to clamp down on a rampantly growing cash loan sector, according to two sources with direct knowledge of the matter and a notice reviewed by Reuters.

A top-level multi-ministry body, tasked by the central government to rein in risks in the Internet finance sector, said in the notice unlicensed organizations and individuals were not allowed to conduct lending business.

Lending institutions are also not allowed to give loans to borrowers who have no income source or mislead consumers into over-borrowing, according to the notice.

Online micro-loans cannot be used for stock market speculation or property downpayment, it said.

Institutions are forbidden from charging interest rates that do not comply with the law, and from conducting violent debt collection, it said.

The government also said institutions were not allowed to steal, leak or sell clients’ private information.

Banks are also restricted from providing funding to unlicensed institutions, the notice said.

Banks’ asset management products are not allowed to invest in asset-backed securitization products backed by cash loans, campus loans or property downpayment loans, the notice said.

Financial regulators are responsible for the cleanup of micro-loan problems in their respective regions, the notice said.

Institutions should increase risk control and are not allowed to hide non-performing assets, according to the notice. (Reporting By Shu Zhang, Elias Glenn and Se Young Lee)

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