Regular small loan companies are only allowed to conduct business locally, and they should handle it in person. Do not charge pre-loan fees or withhold interest, and never use the bank account under the name of an individual (so-called legal person, manager or financial controller) to charge fees.
The Guiding Opinions on the Pilot Project of Small Loan Companies jointly issued by China Banking Regulatory Commission and People's Bank of China defines the nature of small loan companies. Microfinance companies are limited liability companies or joint stock limited companies established by natural persons, corporate legal persons and other social organizations that do not absorb public deposits and operate microfinance business.
Legal basis: Civil Code of People's Republic of China (PRC).
Article 671 Where the lender provides the loan on the agreed date and amount, thereby causing losses to the borrower, it shall compensate for the losses. If the borrower fails to collect the loan according to the agreed date and amount, it shall pay interest according to the agreed date and amount.
Article 672 The lender may inspect and supervise the use of the loan as agreed. The borrower shall regularly provide relevant financial and accounting statements or other materials to the lender as agreed.