Police in the eastern Chinese city of Huai’an have accused credit rating service Kaola Credit and six other companies of involvement in a major operation which sold personal and financial data belonging to Chinese users, China Central Television (CCTV) reported on Wednesday.

Why it matters: The bust is part of an ongoing regulatory effort to clamp down on illegal activities and risky practices in the financial sector, which has extended from the peer-to-peer (P2P) lending sector to big data businesses.

Details: Police in Huai’an, a city in eastern Jiangsu province, have arrested more than 20 suspects—including legal representatives, chief executives, and personnel in sales and technology departments—from Kaola Credit and Beijing-based big data credit rating company called APiX.

  • Kaola Credit is the credit rating service under Shenzhen-listed Lakala Payment. The company has been accused of running an illegal identity-checking service that allows paying users to look up photos of Chinese citizens using names and national ID numbers.
  • Police initially uncovered small loan platforms that illegally purchased personal information and loan data from third-party channels to promote loan products and services, as well as locate users for debt collection.
  • These companies also reportedly shared with one another personal data acquired through illegal means. A Guangzhou-based technology firm linked to the case developed data-crawling software that allows other companies to steal loan information and repayment history data from lenders.
  • Police eventually traced the illicit operation upstream to Kaola Credit, which, along with three other firms, purchased access to an ID search portal belong to APiX. Through the portal, Kaola Credit provided an illegal ID verification service more 980 million times since 2015, according to the report, and reaped approximately RMB 38 million in doing so.
  • Kaola Credit also illegally cached Chinese citizens’ personal information and sold the portal access downstream to other companies.
  • In China, ID verification can only be provided by the National Citizen Identity Information Center (NCIIC), the country’s population identity database, or companies it authorizes.
  • Lakala Payment’s shares tanked after the news broke, falling more than 10% on Wednesday afternoon to close at RMB 49.

Context: Kaola Credit is among the eight credit rating companies—including Tencent Credit, Sesame Credit, Ping An Bank’s Qianhai Credit—that each own an 8% share of Baihang, China’s unified national system for credit data.

  • Chinese regulators have increased scrutiny of data sources and use. The crackdown has hit many smaller data businesses but also publicly listed firms like 51 Credit Card Inc., which was raided by Hangzhou police in October.

Nicole Jao is a reporter based in Beijing. She’s passionate about emerging trends, news, and stories of human interest within the world of technology. Connect with her on Twitter or via email: nicole.jao.iting@gmail.com.

Leave a comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.