October 22, 2019 / 6:34 AM / a month ago

China probes P2P lender over 'intimidation' as crackdown widens

BEIJING/SHANGHAI, Oct 22 (Reuters) - Chinese police are investigating financial technology firm 51 Credit Card Inc for allegedly hiring debt collectors that used intimidation and harassment, part of a broader crackdown on the peer-to-peer lending (P2P) sector.

Police said they had received an abnormally large number of complaints about Hangzhou-based 51 Credit Card, which started as an online credit-card management platform and expanded into the P2P business.

“According to a preliminary investigation, 51 Credit Card entrusted third-party debt collecting services that pretended to be from the government, and used intimidation and nuisance tactics to collect debts,” Hangzhou police said in a post on their official Twitter-like Weibo account.

Shares of the Hong Kong-listed firm surged as much as 30.5% as the stock resumed trade on Tuesday, having plummeted 35% on Monday morning before being suspended as news broke of police raids.

Company Chairman Sun Haitao issued an apology on his Weibo account, saying he had “done harm to certain borrowers”.

Sun and Chief Financial Officer Zhao Ke were assisting the police investigation along with other employees, the company said in a stock exchange statement on Tuesday.

In a separate statement the company denied that it had stolen personal data, in response to criticism from China’s industry regulator in July that its online unit had collected such information without clients’ consent.

China’s P2P industry was once seen as an important credit mechanism, but lately it has been rocked by pyramid-scheme scandals and absent bosses, sparking public anger and tighter official scrutiny.

While the government has focused so far on the industry’s debts, the probe into 51 Credit Card suggests authorities may be turning their attention to how such businesses are managed.

The China Banking and Insurance Regulatory Commission (CBIRC) said on Monday that only 268 P2P platforms were left running normally at the end of July, down from 6,000 at the sector’s 2015 peak.

China’s Supreme Court on Monday warned that individuals and organisations making illegal loans faced jail time. (Reporting by Cheng Leng in Beijing and Brenda Goh in Shanghai; Editing by Stephen Coates)

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