China’s New Lenders Collect Invasive Data and Offer Billions. Beijing Is Worried.

Last month, an internet financial association affiliated with the People’s Bank of China announced plans to start a system that would crunch data from China’s big tech firms. Few details were provided.

The new online lending platforms also raise issues of privacy, a new but growing area of public concern in China. Many platforms that track smartphone use have access to data like location services, phone contact lists and call logs that can be used to track and harass delinquent borrowers.

“The government has struggled a lot because they realize that consumers’ personal information is everywhere,” said Liu Yue, a partner at the Boston Consulting Group in Beijing. “But they don’t really know how to change that because the data is already being used.”

Mr. Bai of the China Association of Microfinance added that “some cash loan companies use all kinds of soft violence to press customers to pay their loans back.”

Last month, Guangdong Province in southern China warned that more than a dozen apps had security loopholes that allowed companies to steal user information. Some of this information was then used to harass borrowers and their friends and families.

One of those was an app called Paipaidai. Its parent company, PPDAI Group, recently listed its shares in New York. The Guangdong authorities said the app sends out users’ contacts without permission. The practice “seriously exposed users’ privacy,” the authorities said.

One Paipaidai borrower, a man named Lin in a small town in Fujian Province called Quanzhou, said he had racked up about $75,000 in loans from 30 different platforms for living expenses and an investment in a shoe store. Mr. Lin, who asked that his full name not be used for fear of reprisal from debt collectors, said he received multiple calls a day from them.

Mr. Lin showed images of text messages from one called Yongsheng Outsourcing that threatened to “use whatever method to…

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