Despite a ban by Chinese authorities, online lenders are still advertising their services to the nation’s university students. This time, they’ve moved their marketing to campus grounds itself.
According to South China Morning Post, Shanghai-based consumer loan company Dtxindai was found to have posted ads, offering loans with exorbitant annual interest rates which go up to 76 percent, on campus grounds, citing a report from state-run State-run China Central Television.
The company moved its online marketing to ads posted inside campuses after the ban last year which saw tight restrictions imposed on loan firms, a staff member told CCTV.
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Last June, the Chinese government outlawed peer-to-peer (P2P) online lending to university students, an unregulated industry that targets students with false advertising and leaves them with high debts to sustain their excessive buying habits. Chinese law prohibits an annual interest rate of more than 24 percent for loans.
South China Morning Post had then reported a few banks will be allowed to extend credit to those in universities, according to a joint directive by the China Banking Regulatory Commission, the Education Ministry as well as the Human Resources and Social Security Ministry.
The tough measure came amid reports of students resorting to these companies through websites and apps like Fenqile to finance small loans so that they can afford to buy smartphones, pay for holidays, or get the latest sneakers. They later fall prey to sky-high debts or unscrupulous practices such as requiring borrowers to send nude selfies as collateral. Some indebted students were even driven to commit suicide.
“Even though some financial institutions are approved to run so-called campus loans, their financial products might not be suitable for university students, whose risk awareness is not strong and ability to repay the money is limited,” Zhao Xijun, a finance professor at Renmin University of China, said.
“The tough measures in the directive can become a foundation of punishment for future offenders.”