Research On The Legal System Of The Non-Governmental Lending Network Platform

The non-governmental lending network platform is a newly arisen quasi-financial institution in near three or four years which provides people with on-line secured loan without mortgages. The method of its operation is based on the network, neither to absorb savings nor to lend with high interests, but to offer a platform of financing for those borrowers and lenders, and supply pertinent services if any loan agreements are concluded among them. Borrowers view the loan online as a commodity on sale; the lenders will choose the most appropriate borrower by means of competitive bidding. The flourish of non-governmental lending network platform injects new vitality into Chinese credit market; it is beneficial to ease the difficulties for personal loan and the loan required by small and medium-sized enterprises. However, this seemingly convenient network lending mode also contains a lot of financial risks, for instance, the default risk of the mortgage-free loan caused by the fragile personal credit system in China, the risk of illegal financing on the network, the secret usurious loan among non-governmental loans, and the incapable control of the loans'practical application. In order to reduce the possible risks and direct the non-governmental network lending platform onto a sound track of operation, it is necessary to put it into the regulation of Chinese financial supervision system.This paper is divided into three parts, namely introduction, main body and conclusion.The introduction mainly introduces the general background of the non-governmental network lending platform, including how it becomes popular, its modes of operation and the hidden risks, all of these demonstrate the necessity to get the formal regulation from China's financial supervision system. Moreover, the research background and innovative aspects of this paper are also stated in this part.The main body of this paper has three chapters. The first chapter presents the basic theories of the non-governmental network lending platform in three aspects. First of all, it states the present operation methods of the platform. Then in the second aspect, the author compares the platform with other financial institutions, such as commercial bank, lending agency without absorbing savings, non-governmental lending intermediary company and other non-governmental organizations (mainly are the underground money shop, benefit association and pooled loan, etc.). In the final aspect, the author determines the legal status of the network platform through the analysis above and considers it is a quasi-financial institution.Chapter two introduces the main problems of the non-governmental network lending platform and four parts are embodied. The first part discusses that the legal systems for non-governmental lending in China are not so comprehensive, because there is no clear and definite legal definition of the non-governmental loaner and there is no distinct legal provisions for the applicable methods of the non-governmental lending; furthermore, the rules of the non-governmental lending interest are not objective and accurate enough. The second part of this chapter analyzes the weaknesses in current financial credit risk evaluation mechanism, more specifically, including the deficient personal credit system and unsound credit rating system. The third part displays flaws of risk control system in terms of bad debt risk control and operation risk control. The fourth part indicates that lack of supervision upon the non-governmental network lending platform includes the indefinite supervision subjects and supervision legal defects.Chapter three of this paper provides several suggestions for the perfection of the network platform and is divided into four parts as well. The first part suggests setting a prerequisite legal system by means of defining the loaner's legal status and regulating the obligations and rights of those loaners. The second part proposes to complete the personal credit system and the credit rating system so as to perfect the credit risk evaluation mechanism. The third part offers five recommendations for the risk control system, namely, to strengthen the examination before the loan, to establish the maximum loan volume, to allow the resale of loans, to set up risk reserve system and to create a blacklist exchange mechanism with other lending platforms among networks. The last part mainly discusses methods to perfect the legal systems of the supervision upon the platform, including establishing supervision rules, defining the supervision subjects and formulating supervision regulations.Finally, the conclusion part combs all the ideas of this paper as a whole and makes a summary of the author's opinion.