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China Clarifies P2P Platform Liability

According to China News, China's Supreme People's Court (SPC) has released their judicial interpretation of civil lending disputes. Confusion had existed over the responsibilities of the platform, in the case of the borrower being unable to pay. The SPC states that the platform does not have to provide a guarantee for the loan, as they merely link up prospective borrowers and lending. However, if they did provide a guarantee - which according to the report is common in an attempt to gain credibility and business - then they are responsible for ensuring that the lender receives payment in full.

a man in a suit and tie

Ni Soubing - dean of the School of Law at Shanghai University of International Business and Economics - commented:

"The judicial interpretation makes it clear that online P2P platforms are not financial institutions and are just intermediary parties connecting borrowers and lenders."

Of particular note, a platform remains liable if it uses a third party guarantor. After all, as's Luo Lui pointed out:

"Even backing from a guarantee company doesn't mean the investment is 100 percent secure"

"The investment money may only be 50 percent secure. Also, even a guarantee company can get into trouble and fail to assume its responsibility."

Last month, AltFi reported on the People’s Bank of China’s announcement of regulation and policies to clean up the sector. This follows months of reports that, whilst China’s P2P sector is growing quickly, the number of untrustworthy providers is also alarmingly high.

Luo did highlight that lenders who lose their money may try to sue to the platform, despite not being offered a guarantee - so perhaps ambiguity is not completely cleared up. Despite this, as Du Wanhua - a member of SPC's Judicial Committee - argued, the move will better protect lenders' rights and help the Chinese AltFi market to develop.

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