(This article was first published on China Business Law Journal column "Banking & Finance", authorised reprint)
Scope of user funds
Limits and proportion
With respect to user collaterals, the Measures stipulate that: (i) in relation to car sharing service, the amount of collateral per unit shall not exceed 2% of the average cost per car of all cars put into operation; and (ii) in relation to bike sharing service, the amount of collateral per unit shall not exceed 10% of the average cost per bike of all bikes put into operation.
Other provisions
(1) Kept in safe custody in a dedicated deposit account:
(2) Assurance of refund:
In connection with user prepayments, operators should specify the conditions for refund of prepayments. If the refund conditions are met, operators should refund the balance of prepayments to users without delay. Operators must not decline or delay refunds or impose any unfair or unreasonable standard terms or technical thresholds. In addition, operators should establish a system and maintain reserves with respect to user prepayments. The amount of reserves shall not be less than 40% of the balance of user prepayments.
Deduction from user collaterals: Deductions from collaterals shall be made in accordance with the deduction conditions specified in the service agreements between operators and users; and
(4) Fruits of user funds:
Operators and users may specify the ownership of fruits of user funds by agreements.
(5) Duties and responsibilities of custodian banks:
Custodian banks shall perform certain duties and responsibilities, including without limitation, opening, changing and cancelling dedicated saving accounts, keeping user funds in safe custody, providing clearing and account checking services for user funds, and providing user fund custody reports, in accordance with the relevant laws, regulations and agreements. However, custodian banks do not provide any warranties regarding the services under the new transport service models between the operators and users.
(6) Coordinated supervision by multiple authorities:
The Measures took effect on 1 June 2019. In consideration of the time required for operators to open dedicated savings accounts, connect their information systems to those of the banks and complete any other appropriate work, the Measures give a transition period of six months for existing user funds to be included in the scope of the regulation. The Measures have provided a well-established and comprehensive framework for regulating the safe custody of user funds under new transport service models. It is believed that they can provide a model for regulatory frameworks in other industries.