(Yicai Global) Nov. 27 -- Chinese consumer industry insiders and lawyers have recently called for a solution to companies defaulting on the repayment of customer deposits based on deposit-related provisions in the e-commerce law, the People's Daily reported.
Six bicycle-sharing firms have recently closed, and resulted in losses related to user deposits have now topped CNY1 billion (USD152.0 million), state statistics from Sesame Credit, the personal credit rating service run by internet giant Alibaba Group Holding Ltd. [NYSE:BABA].
User deposits are not owned by companies and cannot be used for investment or business operations, or to benefit from sedimentary capital, said Zhu Wei, deputy head of the Communication Law Research Center at the China University of Political Science and Law.
The Ministry of Transport issued a set of guidelines for bike-sharing businesses jointly with other nine national ministries and commissions in August, stating that deposits charged by bike-sharing platforms are subject to government regulations and may not be used for any other purposes Existing deposit refund systems should also be improved.
However, the guidelines are not legally binding on service providers, Zhu said. He called for efforts to enforce provisions via ongoing e-commerce legislation, and safeguard the security of deposits and advances in the sharing economy and the e-commerce industry in general, based on the rule of law.
Effectively regulation of deposit-related practices through legislation can protect consumers from financial losses, and stem the tendency to overinvest with sedimentary capital.