(Yicai Global) Nov. 21 -- Low borrowing thresholds and high loan interest rates have seen payday loan platforms develop rapidly in recent years, with the scale of lending rising continuously. Qudian Inc.'s [NYSE:QD] floatation, usury and violent collections have all made headlines and caused controversy as the industry grows.
The industry has exploded to be worth more than CNY1 trillion (USD150.7 billion), according to data from Wangdai Zhijia, a third-party P2P lending information platform. Through the first 10 months of this year, the total trading volume on online peer-to-peer platforms was about five times the figure for full-year 2016.
The National Committee of Experts on Internet Financial Security Technology released a report covering the development of China's cash credit sector on Nov. 20. It highlighted three major problems currently affecting the industry: high interest rates, borrowing from multiple platforms and violence being used during collections.
As of Nov. 19, there were 2,693 active lending platforms, which generally conduct business through their own website, channels on Tencent Holdings Ltd.'s social media app WeChat, and through their own mobile applications. Websites are the most popular format for cash credit lenders, with 1,044 of the operators carrying out business this way.
Users on such platforms now number almost 10 million, with China's southern province of Guangdong and eastern provinces Zhejiang and Jiangsu home to more than other regions. Men make up almost two-thirds of users, considerably outnumbering females.
Nearly two million of these users borrow from multiple platforms, and some 500,000 have taken money from more than 10 platforms over the course of just one month.
Interest rates on payday loans can tip 100 percent annualized. Some platforms appear to offer considerably lower rates, but rake in cash by charging fees for audits, account management and transactions.
Local regulators have begun to gradually adopt rectification measures for cash credit businesses. The financial regulator at Yinzhou District in Zhejiang province closed two non-compliant lenders, while Chongqing municipality required micro-lending firms to complete self-inspections earlier this month. Regulators in southern Guangzhou city and Shanghai's Huangpu District have also investigated cash lenders.
Regulatory measures are not yet officially in place, but people have noticed that Chongqing and Ningbo have brought in policies, a bureau official at a banking regulator told Yicai Global in a recent interview. Lenders who use violence to collect payments will be punished severely, he said, adding that though no programs had rolled out in his jurisdiction, regulatory ideas were being discussed.