The Legal Risks And Regulation Of Peer-to-Peer Lending In China

P2P internet lending(Peer-to-Peer internet lending) refers to a newly emerged model of direct lending between individuals using the internet technology, in which a P2 P internet lending platform acts as the intermediate party. P2 P internet lending first appeared in UK and USA with Zopa, Lending Club Prosper. This model of lending is quickly duplicated worldwide, including China. The market scale of P2 P lending expands constantly with the rapid development and continuous innovation.Lending and load between individuals in China usually happens between friends due to the feature of Chinese traditional culture. Nowadays, lending and load between strangers has come into reality, benefiting from the development P2 P internet lending.Since the year of 2011, P2 P internet lending has experienced explosion in China. Scholars, experts, regulators’ research and discussion of it never stop. As far as it goes, there have been enormous problems within the P2 P internet lending industry, one of which is that many platforms sets up or are closely connected to capital pool. The problem of capital pool does not belong to P2 P internet lending specially. The problem is not new to other financial industry, especially the banking industry, in which capital pool financial products has been sold to financial consumers long ago. This article studies the problems and legal risks within P2 P internet lending business 2 in China from the “capital pool” perspective and offers solutions related to regulations accordingly, borrowing experiences from abroad and other businesses.Full text consists of introduction, body and conclusion. The body contains the below four chapters:The article studies legal risks and regulation of P2 P internet lending in China from the perspective of capital pool, the nature of which need to be clarified first. The first chapter explores the definition of capital pool, which does not have an exact definition in the legal sense. This chapter gives a brief introduction of the facts, problems as well as solutions by the regulating departments of capital pool in banking, trust and fund in China, which businesses shares some common features with the P2 P internet lending business and can provide references when analyzing the capital pool problem in P2 P internet lending business.The second chapter analyzes the reasons why capital pool exists and the different forms of capital pool in P2 P internet lending. The phenomenon is related to the different models of P2 P internet lending platforms. Different models of P2 P internet lending leads to the rise of different kinds of capital pool during operation. Some P2 P platforms may not establish capital pool on purpose, but the money may be detained in the accounts of the platforms inevitably due to the particular model of operation, which will certainly leads to potential legal risks. The whole research of the second chapter is fundamental to the study of the next chapter.Based on the study of the previous chapter, the third chapter researches the legal risks that come with capital pool in P2 P internet lending industry. The main risks includes the risk of illegal fund-raising, the risk of financing for the platforms themselves, the risk of distribution of evidential burden and the risk of money laundering. Of all the legal risks, the protection of rights of financial consumers is closely related to term mismatch and financial consumers’ right to be informed, in other words, disclosure of platform data. As long as we find out the legal risks, we can continue our research on how to come up with solutions in order to avoid the above risks on that basis.The fourth chapter gives thought to the regulation of P2 P internet lending based on the above study as well as the useful experiences in the UK and USA. The design of P2 P lending in the UK and USA avoids the possibility of capital pool problem in the first place. Both countries emphasize the disclosure of data of the platforms. All the suggestions given in the fourth chapter combine foreign and domestic practices accordingly.All types of P2 P internet lending platforms come up constantly in China, a lot of which have closed because of inability to carry on operation. Therefore, it is necessary to put on regulation on P2 P internet lending in China to some extent in order to control the legal risks within the financial industry. The full text gives some feasible suggestions by taking the combination of the possible measures platforms themselves, self-discipline association and the regulating departments can take as a starting point. Of the suggestions the author gives are inspirations from the experiences of developed countries. The author hopes that this article can provide some help to the study of the regulation of P2 P internet lending in China. After all, the healthy and orderly development the newly born industry calls for cooperation of the government, industry organization as well as financial consumers.