The PBoC and other Chinese regulatory bodies plan to add P2P defaulter information to its credit system to crack down on borrowers who try to escape their financial obligations, according to Yicai Global on August 9. According to a document sent to provincial governments, local financial authorities have been ordered to provide details regarding P2P debtors in their jurisdiction who maliciously abandoned debts between July 1 and August 8 this year.
PBoC’s order comes as China continues to tighten the credit environment and strengthen regulations on P2P platforms. As P2P borrowers failed to raise enough money due to the rising cost of capital, many of them were unable to generate sufficient cash flows to repay their lenders. As a result, they defaulted on their payments. On the other hand, many of those who are able to repay their debts also forewent on repayments in the hope that the platform they used will collapse. Currently, development of credit reference systems has lagged behind the boom in online lending. This phenomenon has led to massive debt evasion because the cost of loan defaulting is relatively low. The government’s intervention will likely reveal a real picture of how many borrowers are defaulting and expose delinquent borrowers to the public.