Dozens of policemen stormed the headquarters of online credit card management platform 51 Credit Card in Hangzhou, Zhejiang province on Monday, Chinaventure.com reported.
During the raid that lasted for hours, in which no outsiders were allowed to enter the building, 51 Credit Card’s shares dived nearly 35%, and the company requested the Stock Exchange of Hong Kong to halt trading as of 1:50 pm, pending “an announcement related to inside information of the Company”.
The blitz is reportedly linked to 51 Credit Card’s practice of outsourcing its loan collecting efforts to other companies, an unnamed vice president told Chinese media outlet Xiaojinshe, adding that the company’s peer-to-peer (P2P) lending business runs as normal.
Outsourced loan collection in China is sometimes connected to questionable practices. Chinaventure.com reported that 51 Credit card was once requested to stop using its crawler technologies to collect users’ information of an unnamed Chinese bank.
The fintech company, founded in May 2012 by entrepreneur Sun Haitao, provides a platform called 51 Credit Card Manager app for smart manÂageÂment of credit cards, which has gained 83.5 million registered users and has managed 138.7 million credit cards as of June 30.
In addition to offering basic credit card management services, 51 Credit Card also operates a so-called credit facilitation business, helping credit cardholders and even non-holders to gain loans granted from financial institutions or retail investors on a peer-to-peer lending (P2P) model.
The company disclosed in its interim report that the scale of credit facilitated for financial institutions exceeded that on its P2P platform to comply with China’s increasingly heightened regulation for the sector, where players are expected to cut the size of outstanding loans, the number of borrowers and investors.
“In the first half of 2019, we proactively reduced the average tenure and average size of loans facilitated, to further disperse risk in credit facilitation business,” said the company to its investors.
The total amount of granted loans in the first six months of this year reached RMB 13.83 billion (USD 1.96 billion), down from RMB 12.99 billion during the same period in 2018, following also a decrease from 1.1 million to 0.8 million in the first half of 2018. The average size of loans also shrank from RMB 11,000 to RMB 15,000, while average tenure decreased to 10.8 months from 14.5 months.
The company also started to leverage more on financial institutions, rather than retail investors for funding sources.
Financial institutions accounted for 50.5% of the sources of new loans in June, while retail investors contributed the remaining part. In the first half of 2019, 34.9% of the funding was from financial institutions while in the first half of 2018, the percentage stood at only 8.5%.
51 Credit Card’s investors include JD.com and China Citic Bank, according to Chinaventure.com.
