Democratic Progressive Party Legislator Lin Chun-hsien (林俊憲) yesterday urged the Financial Supervisory Commission (FSC) to curb bad debts stemming from fraud and loan sharking on Internet-based peer-to-peer lending platforms.
Lin made the remark during an event at the Legislative Yuan that charged the commission of failing to regulate peer-to-peer financial activities.
FSC officials were invited to the event to offer a response.
Most borrowers on online peer-to-peer lending platforms have trouble securing loans from banks because of poor credit scores, Lin said, adding that as they are more likely to end up in arrears, lenders often impose extremely high interest rates.
Online lending platforms have existed for years in other nations and have caused many problems, Lin said, adding that in China they are blamed for generating an estimated 60 billion yuan (US$9.2 billion) of bad debt.
Chinese students who lack means are taking out so-called “campus loans” online, sometimes in exchange for sexually explicit photographs as collateral, he said.
The British, US and Chinese governments have been taking steps to regulate online peer-to-peer lending, with the UK drafting laws and regulations that specifically tackle the issue, he added.
“In Taiwan, peer-to-peer lending remains a legal gray area that harbors bad debt, fraud and usurious interest rates, and has serious implications to our society. Enforcement of financial regulations should be carried out in accordance with an entity’s functional behavior, not its institutional type,” Lin said.
“New FSC Chairman Wellington Koo (顧立雄) should do things in a way that differs from the business-as-usual approach of the past,” he added.
FSC official Chou Cheng-shan (周正山) said peer-to-peer lending platforms are online service providers, not financial service providers that the commission is empowered to regulate.
However, the agency has discussed the matter with platform operators and believes that existing laws provide it with the legal leverage to regulate some peer-to-peer exchanges, he said.
For example, platforms are not authorized to issue bonds or financial products, charge lenders before loans are made, violate legal protections on privacy, collect debts illegally or market their services in ways that contravene the law, he added.
The commission has encouraged platform operators to work with established financial institutions and has called on the Bankers Association of the Republic of China to draft trade rules to regulate online lending, Chou said.
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