Banking & Finance

Naked risk

P2P lenders demand nude photos for student loans


Applying for a conventional loan

In The Merchant of Venice, Shylock demands a pound of a borrower’s flesh as collateral for a loan – demanding it must be taken from around his heart should he default.

Fast forward to modern day China and flesh is back on the agenda for borrowers, thanks to a new practice devised by shady lenders. They have been telling young women that they will only grant them finance if they are provided with nude photos of the female borrowers.

The scheme was first uncovered by reporters with Southern Metropolis Daily, which published the scoop last week. Loan sharks are demanding that young women, many of them college students, send pictures of themselves holding an ID card or student card, but wearing nothing. As a further part of the ‘collateral’ the lenders also ask for data on the borrower’s social media circles. Should the debtor fail to repay the money on time, the photos will be sent to family members and friends as a means of humiliating them.

Borrowers who agree to such terms are eligible for larger loans – of two to five times the normal sum. However, the interest rates remain mercilessly high and the loan sharks are typically preying on people with little financial experience. Many of them have no clue how quickly high interest rate debt can balloon. For instance, the Southern Metropolis Daily reported on a case in which a girl borrowed Rmb500 ($75) from an internet lending platform with a weekly interest rate of 30%. Her debt quickly rolled up 100 times to more than Rmb50,000. She was then forced to send the lender her nude photo as collateral for another loan to cover the original debt.

The use of nude photos as collateral is not forbidden by law, even if it raises significant ethical questions. However, it is illegal for the pictures to be leaked. It is also illegal for banks to “promote unauthorised loans” in college campuses, according to a circular issued in April by the Ministry of Education. However, Xinhua has noted that there is a tsunami of flyers littering university premises, with promises of quick and sizeable financing with no guarantees required.

Most of the student loans in question are provided by the country’s fast-growing peer-to-peer (P2P) internet lenders. There is no regulatory body to oversee the sector despite a number of high-profile collapses and scandals, and Southern Metropolis Daily reports that P2P lenders have been hiring part-time students as agents to sell their lending services on campus.

The revelation has triggered condemnation on Chinese social media. “The government has been saying it will regulate P2P lending for a few years. What now?” one internet user wrote on the newspaper’s weibo account. Others are disappointed that so many young people have fallen prey to loan sharks. “It’s okay if you don’t have financial experience. It’s okay if you don’t know how to calculate principal and interest; it’s not okay if you are good at nothing but are very materialistic at the same time,” another netizen wrote, criticising some students for living beyond their means via debt.

According to, many people have been pushed into borrowing from underground lenders because of a regulation introduced in 2009 that makes it difficult for college students to get credit cards. As a result conventional lenders have exited the student loan market, and P2P lenders have filled the void.

The Ministry of Education grants loans to students from poor backgrounds to pay tuition fees and expenses – on the condition that they clear their debt within 20 years of leaving college. Up to 20% of undergraduate students are also entitled to loans that amount to about Rmb6,000 a year. However, the expansion in tertiary education has rendered this quota system inadequate, suggested.

Meanwhile, as the number of defaults on personal P2P loans has risen, the debt collection industry has also been proliferating. CBN reports that debt-collecting agents typically keep up to around half of what they help to recoup for the loan sharks. Promise China, a Shanghai-based debt collector, even went public on the New Third Board (an over-the-counter bourse in Beijing) in October last year.

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