Research On Internet Finance Consumer Protection

Internet finance is essentially a new kind of financial form and business model without credit intermediary. This paper mainly focuses on two typical fields in Internet finance, i.e.P2P lending and crowd funding. Internet finance consumers should belong to the category of "consumer" defined by Law of the PRC on the Protection of the Rights and Interests of consumers". More specifically, the Internet finance consumers refer to those individuals and legal entities that enter into financial service agreement with Internet finance operator, or purchase financial product or receive financial service through Internet technology or platform. The main theoretical basis of the protection for Internet finance consumers is the asymmetric information theory. The asymmetric information between financial operator and consumer tend to induce adverse selection and morality risks. As Internet finance has the characteristics of bilateral market platform, it's of important theoretical significance to review the Internet finance competition under the framework of bilateral market theory.The necessity and urgency of strengthening protection for Internet finance consumers is self-evident. Firstly, Internet financial products are highly professional and complex, and there exist the problems of asymmetric information and unequal status between the two parties involved in Internet financial transactions. Secondly, the exercise of the consumers' rights is particularly difficult, and the right to fair deals faces stiff challenge. Thirdly, the lack of legal systems for consumers' protection leads to the phenomenon of regulatory arbitrage and difficulties in settling disputes of Internet finance consumers. The last but not least, the competition landscape in Internet finance market weighs against the consumers' protection. The competition within the industry itself shows a trend of concentration, and that between Internet finance and the traditional finance is in confusion. Overall, with so many negative factors, it's urgent to strengthen consumers' protection financial by introducing financial regulation.The disclose duty of Internet finance operators conflict with the right of consumers,which roots from the deficience of financial knowledge and the recognizational bias. Common consumers can not make right decision due to the deficience,thus they might believe in the operators. If the disclose duty cannot be regulated, the false disclosion will lead to serious consequence. Finance operators should comply with the Principle of Suitability, make an assessment of the financial goods or services, perfect the comprehensive appraisal system of consumers' risk preference and recognizition,provide the right financial goods or services to the right consumers. The complexity and uncerternty of Internet finance credit reporting lead great challenge to the information safety of consumers, privacy protection become a bottleneck restricting the development of internet finance. In the environment of two-sided market,the supervision of internet finance should respect the basic rules of two-sided market,take a statedy different from the traditional regulaion to ensure the normal order of internet finance market.P2P lending, as a representative development model of Internet finance, embodies the core features of Internet finance. A typical example of its development throughout the world is Lendingclub in the US, and that in China is Lufax based in Shanghai. This paper carries on an empirical comparison of the different impacts on the customers by their respective business models, and makes an analysis on the potential factors influencing the Internet finance consumers'interests. The American regulator SEC classifies Lendingclub as a securities issuer, concluding that it should be governed by Securities laws and protects its consumer through full information disclosure. As for Lufax, it made some adjustment and revolution to the prevailing P2P lending model in the world. The transformation it made brings about a series of legal risks.Combining theoretical and empirical analysis, this paper makes a suggestion on the protection methods for Internet finance consumers. The basic principles of consumer tilt and moderate protection should be established. Due to the absence of legislation in domestic Internet finance industry, it's urgent to speed up the specific legislation of internet finance,and make regulation law of consumer protection. Especially should construct dispute settling system,drawing lesson from the FOS system. It should strengthen the financial supervision coordinating system, paying attention to the coordinating of different supervision authorities.it also should innovate the basic supervision ideal of internet finance.