China has banned online loans to college students following a three-year boom in campus lending, which has been accompanied by outrage over exorbitant rates and various financial scams.
Financial institutions not registered or authorized by regulators are now banned from offering loans on campus, said a recent notice by China’s Banking Regulatory Commission, the Ministry of Education, and the Ministry of Human Resources and Social Security.
The notice said existing online lenders must withdraw from the market. Those who refuse will be shut down. Institutions suspected of malicious fraud, violence, and spreading obscenities will be subject to prosecution.
China Construction Bank, and Bank of China in May initiated new consumer loans tailored for university students, 18 years after Chinese banks stopped issuing credit cards and standard consumer loans to students.
The annual interest rates of the two banks are 5.6 percent and 5 percent respectively.