China investigates fintech firm 51 Credit Card for harassing borrowers in latest crackdown on peer-to-peer lending market

Shares of Hong Kong-listed fintech firm have plunged after police made `on-site investigation’ on Monday following complaints from borrowers

Company issues apology over the case, saying assets are not frozen and key company executives are assisting the police in ongoing probe

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China’s peer-to-peer lending is in crisis amid fraud, defaults and illegal practices. Photo: Simon Song

Published: 1:19pm, 22 Oct 2019Updated: 10:29pm, 22 Oct 2019

Chinese fintech firm 51 Credit Card is being investigated by police for employing underhand tactics to chase delinquent borrowers, showing resolve by authorities to clean up the peer-to-peer lending industry.

The Hong Kong-listed company, which operates a credit card management app that matches borrowers and lenders for small loans, hired external debt collectors who pretended as government officials to threaten borrowers, police said in a statement on its Weibo social media site late Monday.

The probe marks another high-profile clampdown on China’s online lending business, as Beijing tightened its oversight on the shadow banking industry that is becoming a hotbed for Ponzi schemes. In a move to curb malpractices in private lending, China’s top court on Monday spelt out the details of what constitutes illegal lending and acts that amount to severe violation of the law.

Police in the eastern city of Hangzhou, where 51 Credit Card is based, have received many complaints about the company since September, it said. The company is suspected of “picking quarrels and provoking troubles” according to initial probes, according to the statement.

“Our lack of training and oversight on partner companies has led to some radical behaviours in the communication with our borrowers, and it hurt certain borrowers,” chairman and chief executive Sun Haitao said in a statement on Tuesday. “We are very sorry about that.”

Its core business is operating normally and the company has enough cash and assets to protect the rights of lenders and investors on the platform, Sun added. Its assets are not being frozen, the company said.

Shares of 51 Credit Card rebounded 13 per cent to HK$2 at the close of trading in Hong Kong on Tuesday. They had plunged 35 per cent to HK$1.77 on Monday afternoon, following news reports of a police raid of its Hangzhou office. The company had earlier confirmed “an on-site investigation” by authorities on Monday.