(Yicai Global) March 18 -- China has barred internet-based lending platforms from issuing any form of loan to college students, as the country tries to rein in excessive student debt.

Online micro credit firms must not engage in misleading or fraudulent sales pitches of easy cash to students who have no means of paying it back, the China Banking and Insurance Regulatory Commission said yesterday. They also should not target students in their precision marketing and should refrain from sending them push notifications to attract online traffic, it said.

Bigger financial institutions, such as banks, are still allowed to extend credit to students but they must enhance their review process to establish the authenticity of the pupils’ identities and their need for a loan. Those who financially support the students, such as parents and custodians, must guarantee the loan.

In the past, bogus institutions have been luring students to take out credit by offering them collateral-free advances at zero interest-rate, it said. They then trick the students by setting traps in the contract and issuing invoices for a much higher amount than the actual loan.

They can then resort to violence to force students to repay the loans, threatening the pupils and their families. This behavior has led to students running away from home or even committing suicide.

Editor: Kim Taylor