BEIJING (REUTERS) - The National Internet Finance Association of China issued a risk warning letter late on Friday (Nov 24) telling "unqualified institutions" to immediately stop offering loans as Beijing steps up a crackdown on the micro-loan sector to fend off financial risks.
The 1 trillion yuan (S$204 billion) short-term, unsecured lending sector, known as "cash loan" in China, has been accused of charging exorbitant interest rates and violent debt collection practices.
In Friday's warning letter, the Internet Finance Association, a government-backed industry group, said the unqualified micro lenders are disrupting economic and social orders and must stop lending immediately.
"Some institutions are not qualified to issue loans but have used false promotion to attract clients, conduct violent debt collection, and charge extremely high interest rates and fees, causing financial risks and social problems in some regions," it said in the letter released on its website.
Qualified lending institutions should also increase self-discipline, charge interest rates at a reasonable level, and increase information disclosure, the association added.
The companies are not allowed to conduct violent debt collection or harass unrelated people, it said.
China has started to take steps to rein in the loosely regulated lending market.
On Tuesday, a top-level multi-ministry body, tasked by the central government to oversee the internet finance sector, issued an urgent notice to restrict granting of new approvals for micro-loan firms, Reuters reported on Wednesday.
Shares of US-listed Chinese online finance firms fell this week following the government crackdown.