The Research On Legal Regulation Of The Private Lending

Private lending refers to the lending practices in money between citizens,artificial persons, other organizations and non-financial institutions. Such practice hasa long history in China and has presented new characteristics with the continuouspromotion of reform and opening up. This article is to elaborate the current situationsand features of private lending followed with a discussion of its legal status.Applicable legal principles and advices will also be summarized and proposed in thisdetailed study combined with many issues evoked from the judicial practices inprivate lending with an aim for playing positive role in faciliating the reconstructionof legislation on the private lending practices and in perfecting the judicial process.Specifically, this paper covers several aspects as follows:Firstly, this paper analyses the concept and characteristics of private lendingand its current situation. The private lending bears the characteristics of extensiveparticipative subjects, low thresholds, simple procedures, flexibility of time limit andinterest rates, variety of operational modes, etc. The current situation of privatelending in China shows the evident tendency of private fanancing being alternative offormal financing, the gradual expansion of the scale of private lending and the risingrate of interest with a market-oriented trend. The private lending also presentsregional variation nationwide and the lack of effective legal supervision.Secondly, this paper investigates the root causes, the affects and the pros andcons of private lending and generalizes its legal status. The establishment of thesystem of private property rights, the rapid development of private economy, thecommunity pattern of “acquaintances society” of China, plus the urgent need topromote the financial system result in the soaring development of provite lending.Thereby this article analyses the advantages and disadvantages of private lending. Onthe one hand, such loaning practice provides efficient investment channels for lendersand fulfills their loan needs effectively which is conducive to pushing forward thereform of financial system. On the other hand, the private lending behaviours possibly infringe the legitimate interests of involved participants which might trigger socialconflicts even procure crimes.Thirdly, the in-depth analysis of private lending is to be discussed in this articlefrom the perspective of applicable legal principles and judicial practices. The paperargues that applicable legal principles of private lending is the concretization ofprinciples of civil laws. The private lending, as an integral part of private finance,should follow the country’s financial development strategies. Based on the aboveprinciples, this paper makes a detailed study of private lending’s participants, interests,liquidated damages, guarantee and the distinction between private lending and illegalfund-raising.Finally, this paper examines the path to standardizing the development of privatelending. The author states that the improvement of the legal regulations of privatelending should cover the following aspects: to encourage and guide the privatelending which is advantageous to China’s economic development and financialdevelopment strategies; to intensify the legal supervision and monitoring; to punishthe improper behaviours of private lending with a comprehensive application of legalmeasures of civil, administrative and criminal laws.