China announces strict rules for P2P lenders, Yirendai’s stock price plummets

Photo credit: Mike Poresky.

After months of very high profile problems, China’s regulators have finally announced how they’re going to fix the online P2P lending industry. Among the new rules for P2P lenders:

• No accepting public deposits
• No pooling investor money to support the lender’s own projects
• No selling financial/wealth management products
• No issuing asset-backed securities
• All lenders must use third-party banks to watch over investors’ money

Overall, the restrictions are pretty harsh. That’s not a huge surprise; given that fraudulent P2P lender Ezubao lost billions late last year, it looked inevitable that the industry was in for some heavy regulation.

Still, the news hit hard, and investors in Yirendai – the only US-listed Chinese P2P lending firm – clearly aren’t happy. The stock dropped precipitously – it’s down more than 20 percent as of this writing, although at around $25 a share it’s still well above its US$10/share debut early this year.

We have reached out to Yirendai for comment on this story and will update if we hear back.