FSC warns on using offshore Internet bank sites to lend

The Financial Supervisory Commission (FSC) yesterday issued a warning against lending money via offshore Internet banking Web sites, saying such transactions do not enjoy the protection of Taiwanese laws.

The warning came after Lufax.com, a peer-to-peer lending platform under China’s Ping An Group (中國平安), reportedly attracted more than NT$1.2 billion (US$39.9 million) of deposits in Taiwan within six months by offering an interest rate of 8 percent, while Taiwan has the lowest interest rates in Asia.

Savings accounts abroad are not entitled to Taiwan’s deposit insurance protection and are exposed to default and foreign exchange risks, the regulator said.

While lenders may transfer their creditor’s rights to others, there is no guarantee of takeover, creating liquidity risks for the parties involved, the commission said.

Lenders also have to brace for potential hacker attacks on their accounts and theft of confidential information is often seen in non-traditional banking transactions, the commission said.

Non-traditional banking practices are not subject to supervision by the FSC so it cannot intervene when disputes do arise, the regulator said.

Peer-to-peer lending, also known as person-to-person lending, is the practice of lending money to unrelated individuals or peers without going through a traditional financial intermediary such as a bank.

Lending is transacted online on a host Web site using various lending platforms and credit checking tools.