THE Shenzhen Internet Finance Association released a guideline for essential clauses on loan contracts last week, creating China's first forced guideline on online lending contracts, the Shenzhen Economic Daily reported.
The guideline was published only a day after the introduction of rules for online lending in Shenzhen, which were already considered very strict. It was released in the context of the continuous development of private online lending, where contracts have been lacking professional guidance, making them more likely to cause disputes.
According to the guideline, lenders need to claim on the contract that they are qualified investors and guarantee that the funds in question are lawfully owned by themselves. What's more, their full understanding of the corresponding risks and obligations should be included on the contract. Any information of major importance should also be declared in the agreement.
The regulation is comprised of three parts, which were established according to a certain online lending business model, covering lending, credit assignment and intermediate services.
Among the 15 articles on loan contracts, the requirement for rates has been attracting the most attention. The total penalty for interest payments, interest rates and late fees must be limited to within 24 percent of the annual interest rate. At the same time, a contract should also include enforcement measures in the occasion of overdue payments.
As for credit assignment, transfers of debt contracts must have 13 clauses, including the parties'information and original debt information. The guideline specifies regulations for credit assignment and payment.
To draft an intermediate service contract, 10 clauses are needed and they must state the content of the service, and the fees and payment method in detail.
In addition, after registering with Shenzhen's financial supervision department, online loan organizations should state that fact on the first page of the contract. However, this does not imply that an organization's integrity or ability to operate has necessarily been recognized and valued, or that it promises that related risks have been revealed, according to the guideline.
Zeng Guang, secretary general of the Shenzhen Internet Finance Association, said that the introduction of the guideline intends to provide online lending organizations with a standardized and uniform reference for contracts, as well as set the stage for the next step in subdividing the fields within Internet finance.