China’s Hunan province will impose a complete ban on peer-to-peer lenders after it was revealed that gross non-compliance was occurring at the industrywide level.
It was discovered that 0 out of 24 local platforms complied with regulations, according to a statement from Hunan Provincial Local Financial Supervision Administration.
The ban on P2P lenders marks the most radical move by a provisional government against the sector and onlookers expect this to prompt other provinces to also take a tougher stance against the risky industry.
Ponzi Scheme
China’s P2P lenders are infamous for their contributions to the shadow banking system and reputation for fraud. Numerous of these platforms have been exposed as Ponzi schemes misappropriating investor funds for personal use such as risky property projects or personal entertainment.
As of September-end, nearly 6,000 P2P platforms have defaulted on payments or shut down operations, according to data provider Wangdaizhijia, putting at risk more than $30 billion of investments from 2.7 million investors.
