On Prevention Of Legal Risks Of Private Lending

Private lending, which is also known as ‘Informal Finance’, plays a significant roleduring the development of our country’s economy as an essential complement to theformal finance of our country. However, in recent years, with the continuousexpansion of financing scale, the events that private funding chain breaks occurfrequently.Firsty, this article gives a basic definition to the important concepts in private lending;that is, what private lending, petty loan company, and what legal risk is.Simultaneously, this article also briefly sorts out the confusing relationship betweenprivate lending and petty loan companies. Additionally, it also introduces the originsand features of private lending.Secondly, this article introduces the legislation situation of private lending in homeand abroad. In order to formulate private lending activities, many countries stick tothe principle of legislation in advance. And they establish a lot of specific laws, suchas Money Lenders Regulations, Consumer Credit Act, Anti-Usury Laws, Japanendless industry law (Similar to private money lending law),Usury Exemption Lawand etc. Those laws offer good reference to build the private lending system of ourcountry.Thirdly, this article points out the mail legal risk of our private lending activity,including illegal fund-rising crimes that are easily caused by illegal privatemoney-lending activity; vague regulation on the legal consequence of high-interestprivate money-lending, and the inundate high-interest money-lending; the scatteredsituation and conflicts among private money-lending laws and regulations; thecharacter controversy on the money-lending contracts among non-financinginstitutions and companies; and the unfair punishment on money-lending activitiesamong companies.Lastly, towards the legal risk existed in private lending, this article also puts uppreventive solutions, including improving the legal regulations on illegal financingcrime, improving the laws and rules related with private debit and credit high-interest,requesting a specific law and supporting rules to explicit the legal status of privatemoney-lending, proposing loosen the regulation of debit and credit among companiesand etc. And it hopes it could effectively solve the current main problems.