Authorities crack down on predatory student loans

DENGZHOU: In the final hour of his life, Zheng Dexing, 21, checked into a hotel and told family and friends in a flurry of phone messages that he was about to kill himself. “Don’t come collect my body – it’s too humiliating,” Zheng wrote to his father from Qingdao, the seaside city where he had fled from his hometown in the province of Henan.

Saddled with crippling debt and hounded by collectors, Zheng plunged to his death from the hotel’s eighth floor last year.

A second-year university student, he had racked up debts of nearly 590,000 yuan (RM374,000) after taking personal loans from a dozen online finance companies to pay for his gambling habit.

Such tales of indebted students being driven to suicide have become commonplace in Chinese media and social networks in recent years, sparking public outrage.

Regulators say they are the result of a surge in borrowing driven by online lenders who target university campuses, often charging staggering rates of interest and employing violent collection methods.

The government has taken aim at the online lenders, suspending them in June from extending new loans to university students.

Many of the online lenders have complied with the suspension, but still appear to be targeting students – and there is an unknown number of existing loans yet to be collected.

The first online finance companies targeting university students emerged in 2013 and thrived in a regulatory vacuum in which they were not required to secure lending licences.

Students said the universities turned a blind eye to the practices. However, the companies started disappearing from many campuses in 2016 after a spate of student suicides.

Applicants usually only need to provide their contact details, as well as those of family and friends, according to those who took out loans.

Some women have to submit images of themselves nude, or performing lewd acts, as collateral, and were threatened that they will be posted online if debts are not paid.

The student loan problem is just a small part of China’s massive financial system, but public anger over the practices of loan companies has prompted the government to act.

Some loan companies are rebranding themselves as credit services to “young people”, according to their websites.

It is not clear if the ban will become permanent. — Reuters