Former employees of Dianrong, one of the largest P2P lending platforms in China, has accused the company of falling behind on wages and severance pay, according to Chinese media reports (in Chinese).
Amid a government-led clampdown on risky financial practices, the company is closing around two-thirds of its offline branches and plans to lay off 2,000 employees.
A former employee told Netease, “Around mid-January, the company suddenly notified us that it is shutting the branch. We were going to work as usual. They announced the news, shut down the system, and asked [the staff] to sign the severance agreement.” He had yet to receive his wages and commissions for December and January.
A company spokeswoman told Technode that there had been poor communication with some of its former employees, but that the issues had been resolved in person.
Dianrong is closing many of its branches as it works to “optimize its business operation and staffing” in response to the changing government policies and industry environment, said the spokeswoman.
She added, “Through continuous technology upgrades, the company will further reduce the scale of its offline services.” Offline branches will be scaled down to around 30 locations. At its peak, there were around 90 branches across the country.
The first wave of layoffs included nearly 1,000 employees and shuttered more than 30 branches nationwide located in Kunshan, Suzhou, Foshan, Xiamen, Quanzhou, Fuzhou, Guangzhou, Shenzhen.
China’s online P2P lending industry is undergoing a massive shake out
China’s crackdown on the online lending industry has led to a large number of smaller lenders closing up shop. Bigger lenders are also taking measures to expand beyond P2P; PPDai and Lufax, for instance, have plans to branch out to other fintech services.
Online P2P lending started flourishing in China about a decade ago when regulations were much more lax. In the absence of a developed legal framework, the industry became rife with fraud.
Over the past few years, regulators began implementing measures to curtail smaller lending platforms as part of an extensive initiative to lower risk across the financial system. This set off the ongoing P2P lending crisis that has yet shown no signs of abating.