China’s Extremely Personal Loans

In many places, college can be expensive. And the price of an education is often redoubled because many college students are forgoing a full-time salary in order to spend time studying. Loans are pretty common and, in the United States at least, they can get out of control. According to CBS News, the average college debt for those who borrowed money for college and graduated in 2016 was more than $30,000. In all, per the Federal Reserve (via USA Today), American student loan debt totals north of $1.3 trillion (trillion!) dollars.

Students needing money isn’t a problem limited to the United States, either. In China, it’s also an issue, and students are looking for creative ways to finance their education and get some money for other expenses as well. Unfortunately, a dark, illegal side of the lending world has stepped in to fill that gap.

The big problem with loaning money to students is that, typically, they lack collateral. If the student defaults on the debt, the lender has no recourse. (With, say, a mortgage, there is collateral — if you default on that, the bank takes your house and sells it. If you default on a student loan, it’s not like the lender can take your diploma and auction it off.) But some Chinese loan sharks have found an alternative way to ensure payment: blackmail. The Washington Post explains:

Preying on young women who need money for college and other expenses, Internet lenders in China are reportedly offering them high-interest loans in exchange for nude photos of themselves, enticing victims with promises of extra cash and then blackmailing those who fail to pay by threatening to publish the pictures or send them to their families. The photos must show each girl holding an ID card.

To be clear, these aren’t reputable Chinese banks making the loans — the lenders are more like mobsters than they are day-traders. The offers — which can net a borrower as much as 5x the normal, non-nude loan amount — are taking place on peer-to-peer lending sites like one called Jiedaibao, which the Guardian describes as “a platform where individuals – often friends and acquaintances – can lend or borrow money, striking their own arrangements.” According to People’s Daily Online, loans can be as much as 15,000 yuan — about $2,500 — and interest rates can be as much as 30% per week (!).

Per the Guardian, the company which operates Jiedaibao was open to working with officials to prevent such actions, but that was a change from previous policy — per the Post, a Chinese publication had previously “quoted an unnamed Jiedaibao representative as stating that the company had no control over any collateral demands made by a lender as part of ‘a private trade deal.'” And stopping this practice may be difficult regardless. The Post spoke with a lawyer named Fu Jian who had helped some students with loan complaints, who told the paper that “the use of nude photos as collateral was not illegal unless they were published, and that many lending platforms have ‘a large number of middlemen in different cities to seduce students to borrow money.'” And to make matters worse, “China has no institution that oversees online lending.”

Bonus fact: Chinese students, like students everywhere, are often under a lot of pressure to succeed academically. At times, it may be tempting to cheat on an exam. If you’re caught doing so in most places, you’ll fail the exam, perhaps the entire class, and may find yourself expelled. But in China, the consequences can be much worse. Cheating on university entrance exams can result in incarceration. Per TIME, “anyone caught facilitating mass cheating or paying someone else to sit the test on their behalf can face up to seven years in prison. ”

From the Archives: Key Money: South Korea’s real estate lending system.

Related: “The Student Loan Scam: The Most Oppressive Debt in U.S. History and How We Can Fight Back” by Alan Collinge. 45 reviews averaging 5.4 stars.