| P2P (Peer-To-Peer) Lending is an important part of Internet Finance, which reflects the inclusive financial requirements by providing both investment products for investors and major financing sources for small enterprises. After the introduction of P2P Lending in China, there has been an explosive growth in just a few years and China has become the world’s largest P2P Lending market, of which both the number of Internet lending institutions and trading volume are number one in the world. P2P Lending has been used as an important supplement to our traditional financial model. At the same time, P2P Lending is also parallel to innovation and controversy since the beginning of its birth, and Three-Noes phenomenon exists in a long time, namely, No Barriers to Entry, No Industry Standards, and No Regulatory Departments. The operating status of each Internet Lending platform varies greatly in practice. In recent years, dozens of P2P Lending platforms have been bankruptcy, running off or absconded with the funds. The operating mode of some P2P Lending platforms also presents illegal fund-raising suspicion. These problems will damage the interests of investors and also affect the stability of the financial order and social order. Under such context, formal financial institutions as commercial banks start to involve in P2P Lending market and play a "stabilizer" role as welcomed by participating in the P2P Lending business. Such involvement is not only to expand revenue sources for commercial banks, but also to stable the market order and safeguard the interests of investors. How to identify the basic civil law relations and the corresponding civil liability of P2P lending? How to evaluate and explain the current special trading arrangements in P2P lending practice? How to protect financial consumers’rights in P2P lending? How to improve relevant laws and regulatory rules? Meanwhile, what kind of legal issues should be focused on and how to prevent the relevant risks about commercial banks’participation in P2P lending? There are so many problems need to be studied and discussed. To solve these problems, the author has systematically studied and analyzed the legal issues of P2P Lending with a comprehensive combination of civil and commercial law, financial regulation, P2P lending and commercial banks’participation in P2P Lending practices.This article is divided into six sections.The first section conducts legal reviews on the development of P2P lending and the current situation of commercial banks’participation in P2P Lending businesses.First, this section will analyze on the current development condition of P2P Lending as well as its relevant laws and rules on the level of both domestic and overseas cases. It reviews the P2P Lending business development situation of both domestic and overseas, and makes a comparison of the UK, the US, and China’s laws and regulations towards P2P Lending by distinguishing their features and assessing their strengths and weaknesses.Second, this section will first analyze and discuss the necessity and legal feasibility of commercial banks’participation in P2P Lending, and then will roughly introduce the current situation of Chinese commercial banks’participation in P2P Lending.Third, on the basis of the analysis on the four operating modes of P2P Lending, this part elaborates the six business modes commonly used by commercial banks to participate in P2P Lending, and such modes will also be analyzed and compared from a legal perspective.The second part makes an analysis about the main civil legal relations of P2P lending.First of all, this paper points out that the core of the main legal relations in online lending lies in "Intermediary & Private Lending", based on which it analyzes the characteristics of the online lending distinguished from the traditional intermediary. On this basis, the paper suggests that apart from traditional intermediary’s faithful reporting obligations, diligence obligations and the burden of the cost of intermediary activities, intermediary of online lending also bears the legal obligations different from the traditional broker, which are obligations of infonnation disclosure and risk warning higher than the traditional reporting obligation, higher diligence obligations and security obligations (including the security of online lending platform system, client funds and client information) as well. Subsequently, it analyzes the corresponding civil liabilities of the online lending intermediary who violates these obligations. Finally, considering that adverse legal consequences will be resulted if P2P lending products are confused with commercial banks’financial products during the participation of commercial banks in P2P lending, this paper legally compares P2P lending intermediary and commercial bank financial service, implying that differences exist in aspects of legal nature, civil rights and obligations, civil liabilities and applicable regulatory regulations, and then it points out that commercial banks should perfect the management, business structure and legal documents on the basis of the legal differences mentioned above.The third part discusses the civil and commercial law issues under the new operating mode of P2P lending, which involve the bill pledge loan mode, the right of income on specific assets transfer mode and the witness mode.At present, the new operating modes of P2P lending are under controversies on the effectiveness with a lack of clear legal-basis in civil and commercial law. In this chapter, three typically new models are analyzed, of which the first two are generally applicable and the third is a special mode for commercial banks participating in P2P lending.First, the bill pledge loan mode is studied. This paper analyzes the main legal relations and contractual arrangement in this mode, and discusses the relevant issues of bill pledge (including the lack of endorsement of bill pledge, the bill pledge sharing arrangement and the validity of agency arrangement in bill pledge).This paper argues that the lack of endorsement should not lead to the invalidity of a bill pledge necessarily. In view of the different regulations of bill pledge between the Negotiable Instruments Law and the Property Law as well as its relevant judicial interpretation, the author puts forward the view of "one divides into two"——the pledge should be divided into the pledge on Negotiable Instrument Law and the pledge on Property Law, which means for the pledge on Negotiable Instrument Law, "Pledge Endorsement" should be taken as the requirement of validity, while as for the pledge on Property Law, it should be "Pledge Contract & Delivery" that makes the pledge come into force. The pledge on Property Law and the pledge on Negotiable Instrument Law bear legal differences in the aspects of the way to prove and achieve the pledge right, the effect of bill defense and defending against a third person, the effectiveness of right guarantee, and the limitation and validity of re-endorse. Market subjects could make a rational choice with the understanding of the legal distinctions between the two. In addition, for the common arrangements of bill pledge sharing and bill pledge agency in online lending under the mode of bill pledge loan, the author holds that despite the law keep silent on these points, the validity of relevant arrangements should be recognized within the trend of "real right legalization principle weakening", to protect the interests of Internet trading participants and to promote the relevant transactions.Second, the paper analyzes the right of income on specific assets transfer mode. It makes an analysis of the main legal relations and contractual arrangement under this mode, and discusses the legal issues of the right of income on specific assets. The author holds that the legal nature of the right can be adopted as "future creditor’s right". Meanwhile, the right of income on specific assets bears the legal characteristics of contractual right (but not statutory right), credit, relativity, certainty and subordination, and the related parties’autonomy should be respected, with the legal effect of the transfer recognized. But it is also necessary to realize the legal limitations of this mode in the lights of a lack of independence, the failure of defending against the third party in good faith and so on, so to make risk control arrangements as well.Third, the author analyzes the witness mode, which is the major mode of commercial banks participating in P2P lending. This paper analyzes the main legal relations and contractual arrangement under this mode, and has analyzed legal liability of the witness with the relevant judicial precedents. After that it points out the legal liability differences between situations where commercial bank act as the witness and the intermediary under comparative analysis. Generally speaking, the civil liability of the online lending witness is lower than that of the intermediary, making the consideration on civil liability taken by some commercial banks when they take part in online lending business having a reasonable legal basis However, the relatively indirect participation and relatively light civil liability in the P2P transaction do not mean the witness bear no legal responsibility. In the case of non-performing, commercial banks acting as witnesses may still bear additional liability to the parties concerned.The fourth part studies on the financial consumer protection issues in P2P lending.Firstly, it demonstrates several key issues on the financial consumer scope in P2P lending, including that the behavior of online lending can be legally incorporated into the "financial consumption", and that the individual investors and borrowers should be recognized as financial consumers while unit investors and borrowers ought to be excluded from the scope. At the same time, individual and professional investors should not be ruled out from P2P financial consumers.Secondly, the paper analyzes the key points in the protection of financial consumer with the major concern of online lending investors, combined with the consideration of online lending borrowers. The common interests of online lending investors and borrowers include the right of information security, the right of fair deal and the right of claiming for compensation, while relatively special interests of online lending investors are composed of financial security right, the right to know, the right to choose, and the right to education.Thirdly, it analyzes the existing problems of financial consumer protection, including the insufficiency of guarantee under the present legal system, the risk in the guarantee of creditor’s rights and right safeguard, the risk of right-to-know impairing, the security risk of identity information and the security risk of capital. In order to solve these problems, the paper proposes some measures to strengthen the protection of financial consumers from the three aspects of constructing the pre-precaution mechanism, perfecting the guarantee regulations and strengthening the ex-post safeguarding mechanism. Furtherly they are specified in 11 points, which include improving the legal regulation of Internet financial consumer protection, integrating consumer protection institutions, establishing the protection system of compliant investors, strengthening investor education, perfecting the personal information security regulatory norms, enforcing the regulatory requirements of information disclosure, improving the construction of credit system in online lending, introducing "the principle of appropriateness" in product promotion and "hesitation mechanism" in investment, establishing guarantee fund of online lending, and setting up the multi-level after-dispute settlement mechanism.Finally, it analyzes the problem of financial consumer protection that commercial banks should pay special attention to in P2P lending. The paper states that the commercial banks should arrange the use and transfer of customer information reasonably, regulate the standard terms properly, do a good job in the isolation of risk with financial products and consignment products, and set up compliant credit promotion measures.The fifth part systematically analyzes the main legal risks and precautions of the P2P lending platform operation.It analyzes the major legal risks and preventions of the general online lending platform as long as the platform for commercial banks participating in P2P. With the civil and commercial law theory, market practice of P2P and commercial banks, and the relevant cases, this article prompts the legal risks one by one, and puts forward the corresponding prevention measures, making it practically significant and pragmatic.For the general P2P lending platform:One is the risk that improper business model might be suspected of illegal fund-raising, and business structure and business model should be reasonably designed to avoid this risk. Second, the legal risk lies in the validity and proof difficulty of electronic contract signing. The corresponding prevention is standardizing the electronic signature form, and introducing a third party service agency to improve the credibility of electronic contract evidence. Third, facing the legal risks caused by the non-standard private financing arrangement, the mode of private financing should be regulated to ensure the validity of online lending contract. Fourth, the improper legal framework or arrangement on power and responsibility may lead to the risk of right loss or responsibility burden. For this problem the paper calls for the appropriate arrangements about rights and obligations at online lending platform.As for the platform where commercial banks carrying out P2P service:First, it puts up the risk led by operation beyond business scope and the administrative licensing of new business. Correspondingly, the paper raises the measures operating as far as possible within the present business scope and making a good communication around regulations. Second, "rigid payment" risk and risk transfer problem call for measures not only effectively protecting the interests of investors, but also avoiding the risks of P2P transferring to the internal business of commercial banks. Third, the risk in P2P lending funds deposit may rise. And the corresponding measures are the clear definition of depository responsibility and the establishment of cooperative P2P platform access screening mechanism. Fourth, in the light of money laundering risk, anti-money laundering measures such as customer identification should be strengthened.The sixth part puts forward some suggestions on the improvement of legislation and supervision regulations.On the whole, this paper argues that in P2P lending the relationship between "financial innovation and legal regulation" should be balanced, and the supervision Legislation principle of "balancing support and regulation, equally treating promotion and supervision" should be insisted. On this basis, it puts up suggestions to perfect legislation and supervision from three aspects as follows.Firstly, this paper proposes to revise the relevant civil and commercial laws and regulations, and to improve the civil and commercial legal rules of P2P lending operation. Recognizing the legal effect of some new transaction mode through the improvement of civil and commercial legal regulations in order to meet the requirement of market participants of "autonomy of the will", to promote the realization of the transaction and to protect the rights of market participants. It specifically includes the following points:The first part is to improve the laws and regulations on the intermediation contract, and to define the intermediary’s responsibility. The second is to adjust the relevant regulatory requirements of electronic signatures and electronic evidence, which is conducive to the effectiveness of electronic contracts from the legal aspect. Third, giving recognition to the validity of the transfer right of specific assets income with an appropriate form. Fourth, clarifying the legal effect of proxy pledge and the sharing pledge right. Fifth, amending the laws and supervision regulatory rules on bills, and strengthening the no-cause character of instruments, leaving room for financing notes. Besides, adopt the view of "one divides into two", dividing the pledge into the pledge on Negotiable Instrument Law and the pledge on Property Law, making the legal difference clear, by which a basis for the legal effect of the pledge of bills lacking endorsement in practice is provided.Secondly, it puts forward some pertinent suggestions on how to establish and improve the general regulatory system of P2P lending service. In view of the recent high incidence period of P2P lending risk, this paper suggests a regulatory legislation standard of "combining punishment with leniency, making the policy moderately tight", including the followings:First, rationalizing the relationship between central supervision and local supervision, adjusting the current regulatory mechanism from "double charge" to "central supervision is held essential with local supervision as a supplement", and eliminating the twilight zone between "behavioral supervision" and "institutions supervision"; The second is to promote the access management of P2P lending, adjusting the current "record management" principle to "license management", strengthening the pre-approval, and putting forward access requirements such as the capital standard; Third, imposing regulations of "substance over form", strengthening supervision and restricting on behaviors of avoiding regulations from the organization, product, and operation aspects. Fourth, establishing anti-money laundering regulatory principles in P2P lending; The fifth is to improve the exit mechanism, to establish the mechanism of "living will" and to improve the laws on bankruptcy-remote.Thirdly, it provides suggestions on the legal rules and regulations of commercial banks in P2P lending. It is advised that to strengthen legal regulation and risk prevention while supporting commercial banks to participate in P2P lending activities, and to ensure the isolation of risk between P2P lending and traditional business of commercial bank, keeping both of them in a healthy development. The suggestions include:First, adjusting restrictive regulations on the investment of commercial banks and broadening the scope of business of commercial banks appropriately. Second, correctly handling the relationship between "equality and diversity", developing suitable rules for commercial banks participating in P2P lending business. The third is to improve the tolerance in the regulation of commercial banks involved in Internet financial innovation, relatively relaxing the administrative licensing requirements for commercial banks in P2P lending business; Fourth, the financial regulatory agencies should enhance monitoring and supervision of the P2P lending operated by commercial banks, avoiding systemic financial risks caused by the risk transfer from "activities outside off-balance-sheet activities" to balance-sheet business. Fifth, strengthening the supervision collaboration between traditional finance and Internet finance. |
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