CHINA said all existing peer-to-peer (P2P) lending platforms must become small loan providers within two years, a notice seen Wednesday showed, the latest official edict aimed at curbing the once-booming industry.

All Chinese P2P firms need to clear outstanding loans in less than one year before switching to small loans, according to a notice issued by China’s Internet Financial Risk Special Rectification Work Leadership Team Office, which was launched by the government to mitigate risks in the online lending sector.

For firms that manage more than 5 billion yuan (US$710.3 million) in outstanding longer-maturity loans, the grace period can be extended by up to two years, according to the notice.

China’s P2P industry was once seen as an important credit mechanism, but lately it has been rocked by pyramid-scheme scandals and absent bosses, sparking public anger as well as a broader government crackdown.

In October, Chinese police began an investigation into financial technology firm 51 Credit Card Inc. for allegedly hiring debt collectors who used intimidation and harassment.

Ping An Insurance-backed Lufax also said it would exit the P2P market, one of the first signs that the tide was turning against China’s lenders.

The transition plan, which will begin at the end of November, is “an active approach to resolve risks contained in the existing business of online lenders,” the official notice said.(SD-Agencies)