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In recent years, there has been a surge in abnormal rights protection incidents in the financial sector, especially concerning organisations claiming to represent consumers¡¯ rights but, in reality, extracting undue benefits from consumers and financial institutions through illicit means.

Although this situation has garnered attention from various authorities, there are no specific regulations guiding financial institutions on how to handle such abnormal rights protection activities.

To address this, the National Internet Finance Association of China (NIFA) has developed the Guidelines for Internet Finance Institutions to Deal with Abnormal Rights Protection. The guidelines are important for internet finance institutions in handling abnormal rights protection and safeguarding their own legitimate interests.

The definition

The guidelines define abnormal rights protection as activities or behaviours that exert pressure on institutions through various improper means to seek undue benefits. They are categorised into level 1 and level 2 abnormalities. Level 1 abnormalities refer to serious violations of relevant laws and regulations or national provisions, or actions severely harming the legitimate rights and interests of consumers or institutions.

Level 2 abnormalities involve violations of relevant laws and regulations or national provisions, or actions contrary to social order and morals, while harming the legitimate rights and interests of consumers and institutions.

Response strategies

Under specific conditions, non-acceptance is permissible. The guidelines explicitly state that institutions may refuse to address abnormal rights protection in the following situations:

1. Matters not constituting infringement of consumer rights;
2. Lack of evidence, facts or clues reflecting the institution¡¯s infringement of the rights of the complainant;
3. Failure of the complainant to provide true identity or providing false identity;
4. Matters already handled through judicial channels;
5. Instances where consumers have accepted the institution¡¯s proposed solutions, yet the complainant renews the complaint on the same matter;
6. Complainants other than the consumers themselves who refuse to provide valid identity information or other identity certification documents (or valid institutional establishment documents) and authorisation letters; and
7. Other situations not accepted under laws, regulations or rules.

For the listed abnormal rights protection activities in the guidelines where non-acceptance is permissible, institutions can make independent decisions after review, significantly reducing the cost of complaint handling for relevant institutions.

Collaboration with the NIFA. The NIFA will organise relevant institutions to jointly defend against abnormal rights protection in accordance with the guidelines, safeguarding the normal operation of institutions.

Specific measures include but are not limited to: establishing a specialised committee to address abnormal rights protection; establishing an independent third-party review mechanism; and formulating industry-wide information sharing mechanisms.

Institutions should first actively participate in the construction of industry-wide information sharing mechanisms and submit information related to abnormal rights protection and illicit activities in a timely fashion.

Second, institutions should pay special attention to the review mechanism. If suspected abnormal rights protection activity is detected, they should apply for a review with the NIFA and submit relevant materials.

If confirmed as abnormal rights protection, institutions should handle it in accordance with the guidelines. Additionally, institutions can report review opinions to financial regulatory authorities and, when necessary, seek explanations from the NIFA for assistance.

Finally, institutions can submit negative information related to financial rights protection on the internet to the joint work mechanism responsible for handling such cases, requesting that the network platform to address it.

Collaboration with public security, procuratorates and courts. The guidelines require institutions to promptly report to relevant national competent authorities when they discover suspected illegal activities. In recent judicial practice, there have been cases where abnormal rights protection has been characterised as criminal activity.

For instance, on 15 May 2024, an article published on the official WeChat account of the People¡¯s Court of Hongkou District, Shanghai, highlighted this case: Miao, owing more than RMB7,000 (USD965) in loans to PPDF, faced debt collection efforts.

Tang, using Miao¡¯s phone and bank cards, impersonated Miao to answer PPDF¡¯s collection calls, recorded them, and drafted complaint letters. After Miao signed these documents, they were sent to various authorities, including the Shanghai Municipal Bureau of Letters and Calls.

Under regulatory pressure, PPDF mediated with Tang. Tang demanded RMB40,000 compensation to withdraw the complaint, and forgiveness of Miao¡¯s loan. Under pressure, PPDF transferred the money to Miao¡¯s account and waived the loan. Ultimately, the People¡¯s Court of Hongkou District, Shanghai ruled that Miao, Tang, and two others were guilty of extortion. This case illustrates that the public security organs, procuratorates and courts have reached a consensus on categorising abnormal rights protection as potential extortion. Relevant industry practitioners encountering such situations should focus on preserving relevant evidence and promptly communicate with public security organs. They should actively assist the public security organs, financial regulatory authorities and industry associations in investigating and handling relevant cases.

The guidelines provide clear instructions for institutions on how to handle abnormal rights protection incidents. Institutions are urged to thoroughly study these guidelines and firmly resist any attempts to pressure them into yielding undue benefits through improper means, thereby safeguarding the legitimate rights of consumers.

Guan Zhenming is a senior partner at Joint-Win Partners