The rise of the “leaseback model”: a new variant of cash loans?

At the end of last year, after the regulation of cash loans , the industry began to split. Some companies have begun to improve their products and try to achieve compliance transformation. On the other hand, some players try to circumvent regulations.

The industry is full of various strange ways such as points cards, membership cards, and sky-high priced goods, but the most creative and bold way is: leaseback.

There are now hundreds of platforms that have started to provide "leaseback" services. Because the leaseback is still immature and full of loopholes, the bad debt rate is as high as over 40%. In order to make a profit, the annual interest rate for leaseback is astonishing and generally higher than cash loans .

A platform called "Lehuizu" even charges a high interest rate of 1832%. They even began to extend their tentacles to the student group, and "millions of student users were once again involved in high-interest cash loans."

In the industry, a "leaseback" industry chain has even been formed, and third-party platforms have emerged to help platforms go online in batches and transform collectively. According to an insider close to the regulator, relevant departments have noticed that many variants have emerged in the trillion-dollar cash loan market...

01 The rise of leaseback

At the end of last year, after the regulation of cash loans, a large number of overdue payments occurred in the industry.

" This is because most platforms no longer lend money, and cash loan users are forced to go ashore. " Han Tianxin, CEO of a cash loan platform, said that the industry was in mourning at the time and everyone felt that the industry was completely over.

But a few months later, the industry began to revive.

As overdue payments stabilized, new cash loan users began to pour in, and many platforms opened up their channels and started to increase their sales.

"There are always policies from above and countermeasures from below." Han Tianxin said that after supervision, most platforms in the industry are not thinking about how to comply with regulations, but how to circumvent supervision.

It was at this time that the leaseback model emerged. In fact, the earliest sale and leaseback model was some platforms that tried to do credit leasing. The model is that users no longer need to buy a mobile phone in installments, but can rent a new mobile phone by paying a small rent every month.

After one year, users can consider paying the balance and buying the phone, or they can choose not to rent it and buy a new phone. This model was very popular in the early days, and many industry practitioners even believed that it would defeat the "installment model" and become a new form of consumption.

But soon, the "leaseback" model was exploited by cash loan players and completely ruined. Two months ago, Hu Bo noticed that a new type of "kouzi" was being promoted in various kouzi and brother groups.

"Mobile phone mortgage loans, funds approved in seconds, come and get them quickly, guys." Such advertisements kept appearing on the screen, and Hu Bo also tried several products. He found that these platforms are usually named "leaseback", "buyback" and "recycling". For example, platforms such as Lightning Buyback, 51 Buyback, Ant Leaseback, Le Leaseback, and Quzuzu.

In order to distinguish a real leaseback, these platforms will put some screenshots of borrowing or overdue payments in the picture display area, and "the old guys will understand it immediately."

The leaseback platform will display some pictures to remind users that it is actually a "cash loan platform"

Hu Bo said that leaseback is becoming the "new favorite" of the old brothers.

How popular is this model?

We searched the Apple App Store and major Android app stores and found hundreds of apps related to leaseback, buyback, and recycling.

In just one or two months, hundreds of players flocked in and used this "crossing the line" method to test the bottom line of supervision.

02 Bypassing regulation

This model is called the ultimate model for "perfectly" circumventing regulation by people in the industry.

How does it do this?

"After the user downloads this APP, it will automatically identify what kind of mobile phone he has. The first step is that the user has to sell the phone to the platform." said Chen Si, who is the person in charge of a leaseback platform.

Generally, when you enter the leaseback APP, you will see this page:

"The next step is to evaluate the price of the phone. However, this price actually does not take into account the value of your phone at all. It is a normal process for applying for a cash loan," said Chen Si.

What users need to submit are loan data such as ID card information, work information, operator data, emergency contacts, etc.

"These data will enter the background for risk control review. Once the review is passed, the price of recycling a mobile phone will be displayed, which generally ranges from 1,000 yuan to 3,000 yuan," said Chen Si.

The second step after the evaluation is to lend money.

For example, if the platform estimates the value of a mobile phone at 1,000 yuan, it will transfer 1,000 yuan to the user’s bank card. Then, ask users to sign an "ownership" agreement.

"Note that at this point the ownership of the phone is transferred to the platform, and you need to provide the device ID and password. For example, Apple requires you to provide an Apple ID and password." Chen Si said that the next step is the most ingenious step of this model.

Next, the user has to rent the phone back from the platform. "For example, if a mobile phone is estimated to be worth 1,000 yuan, and the rent for one week is 1,200 yuan, and then I pay 1,200 yuan to the platform, which means 1,000 yuan is a loan and 200 yuan is the interest on the loan," said Chen Si.

But in fact, "mobile phone rental" is just a gimmick. From beginning to end, the mobile phone has never left the user's hands. The most amazing thing about this model is that by adding the medium of mobile phones, it perfectly bypasses the concept of "borrowing".

"This is not a loan, this is a lease. All the regulations on cash loans have no effect on us." Several practitioners of leaseback products pointed out incisively.

"The wisdom of the Chinese people is truly endless." When Han Tianxin heard about this model for the first time, he was "shocked". The so-called 36% annual interest rate red line and the requirement of an Internet micro-loan license for lending, all the hard restrictions were bypassed.

Of course, leasing also requires a leasing license.

"The prices of financial leasing licenses have been hyped up recently. Previously, a license for a region only cost 200,000 yuan, but now it has risen to 400,000 yuan, doubling in price," said an intermediary who resells licenses.

In the financial world, there is never a shortage of arbitrageurs and profit-seekers who take advantage of any opportunity.

03 Interest 1000%

And this model is evolving into the most brutal "harvester". Many leaseback platforms are charging sky-high "head interest".

Many platforms will deduct a portion of the so-called "assessment fee" or "service fee" before lending. " These fees are actually the upfront interest. " Chen Si pointed out the logic behind it.

Taking "Happy Lease" as an example, if the mobile phone is valued at 1,000 yuan, you need to pay a 260 yuan appraisal fee, and 740 yuan will be credited to your account, but you will need to repay 1,000 yuan after 7 days.

Calculated in this way, the annualized interest rate is as high as 1832%. Most leaseback practitioners admit that the interest on leaseback is actually much higher than cash loans.

"The annual interest rate is generally above 500%. Many are as high as 1000%." ​​Chen Si said that this is because the risk of this model is too great and high risks can only be covered by high interest rates.

Who are the users of leaseback?

"These are users who find it difficult to borrow money from cash loans." Chen Si studied the backend data and found that the qualifications of the users were extremely poor. Several practitioners working on leaseback platforms revealed that the bad debt rate in this industry is as high as 40% or even higher, “sometimes as high as 50%”.

This is because the leaseback model is not yet mature.

"For example, how do you collect debts? Now it's a lease, not a loan, and users have many excuses for not repaying the loan." Chen Si said that many users feel that this model has no legal counterpart, and it's okay even if they don't repay the money.

Of course, the platform will also have some new ways of collecting debts. For example, use the user's Apple ID and password to remotely lock the phone. Users have to spend money to find professionals to unlock it. Hu Bo said that many brothers are not afraid of the leaseback model, " Even if they go to court, the platform may not win, and it will not be reported in the credit report, so they don't want to pay back the money ."

In order to make more money and reduce risks, these platforms have extended their evil hands to students. "Our focus now is on the student group." Chen Si said that this group has the lowest customer acquisition cost and the lowest risk.

After Chen Si relaxed the age limit for "re-lessees", a large number of customers under the age of 20 poured in, and the monthly loan amount doubled.

"Cash loan regulations prohibit lending to students, but this is a leaseback, and there are no such regulations or red lines." Many practitioners spoke frankly, saying that the student group is their core user group.

How many people are there in the leaseback group?

"We have 100,000 users on our platform, and we lend more than 100 million yuan every month. We are a very small platform. If there are 100 platforms in the industry, the conservative estimate is that there are several million people," said Chen Si.

Among them, the majority are students. " At least millions of student users have started using this product ," Chen Si speculated.

Hu Bo also noticed this trend, and the intermediaries began to frequently promote their products in the previous "campus loan" groups. Several practitioners revealed that many sales teams of the leaseback platforms even began to secretly distribute flyers on campus.

Leaseback is retracing the growth path that cash loans took in the past, using a more brutal and exploitative approach.

04 Industrial chain takes shape

This industry is forming an industrial chain to help the cash loan industry enter the leaseback field in large numbers.

"Most companies will not directly use cash loan companies to do leaseback, but will set up a new company." Chen Si said that this is because everyone knows that this model is very risky and may be stopped by regulators at any time.

But no one wants to miss this opportunity.

The model is too new and is still in a chaotic period. In a chaotic era, there are no rules at all, and the result is “the bold will die of overeating, and the timid will die of starvation.”

There are plenty of opportunities and loopholes here. For example, when launching on various app stores, “there is no need to comply with the rules for launching financial apps.” The business director of Zhiwei Technology said that leaseback is undoubtedly a direction for the concentrated transformation of cash loans.

He said they noticed the rise of the leaseback model several months ago. So, they developed a leaseback system and sold it in batches to cash loan companies that were preparing to "transform". "Now, most of the platforms cooperating with us are cash loan platforms, and some IOU platforms." He said that they have built a leaseback system for two platforms.

There are four or five more platforms that are about to go online. What if some users really treat this platform as a mobile phone repurchase platform and send the phone back? "You can set various thresholds. For example, the phone must be 90% new and must not be overdue, otherwise the phone will be rejected." In addition, he said that the business manager will also teach some "business skills."

"So, after you appraise the phone, the maximum credit limit cannot exceed 50% of the price of the phone, otherwise you will lose money," he said.

The industry is forming a complete industrial chain.

"It only takes 35 working days to launch a platform." These third-party technology and service companies are helping this industry chain to expand rapidly and multiply in batches.

"There are only a dozen or so third-party companies like this now, which specialize in developing leaseback systems. In fact, the technical content is not high. It just adds a leasing process on the existing cash loan system." Chen Si said.

Judging from the background that the business manager showed us, it is basically the same as the background of the cash loan system. This self-proclaimed clever approach is attracting the attention of regulators. "Many industry practitioners have reminded us of this model." A relevant person in charge close to the regulatory authorities said that the regulators have monitored a number of leaseback platforms and conducted in-depth research on their models.

"It is a variation of cash loans, and even worse than cash loans." The person in charge said that they have basically defined this model.

"On the surface, this model seems flawless, but in fact the intention to circumvent regulation is too obvious, which makes it even more dangerous. " Han Tianxin said that as long as the regulator gives an order, this model will be completely stopped and the industry will be uprooted.

"After the introduction of regulations, the financial industry will definitely have a period of escape, and companies will put on vests to make it difficult for regulators to understand," said a person familiar with the regulatory authorities.

Next, the industry will enter the next governance stage. "The industry is too chaotic and too barbaric, which will only make supervision more stringent and specific." What Han Tianxin is worried about may happen. Bad money drives out good money, making supervision extremely strict and leak-proof...

(At the request of the interviewees, some names in this article are pseudonyms)

The author of this article @YiBen Finance compiled and published by (Qinggua Media). Please indicate the author information and source when reprinting!

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