Worry about bad debt, default, and "shrinking" consumer loans

ANTD.VN - The police force's crackdown on "gangster" debt collection crimes has caused gangs operating in this field to disintegrate and shrink.

Debt collection from gangsters, demand 571 billion, receive commission of 485 billion

At the workshop on the current status of consumer lending activities of credit institutions and debt collection activities, organized by the Banking Association, Lieutenant Colonel Bui Duc Tai - Deputy Director of the Criminal Police Department ( Ministry of Public Security ) said that in early 2023, taking advantage of the difficulties of the socio-economic situation, the crime situation and law violations related to black credit activities have had complicated developments.

Foreigners (Chinese, South African, Russian, Latvian) come to Vietnam to establish, acquire, hire people to act as pawnbrokers, consultants, financial businesses, and recruit employees to use loan sharking applications and websites with interest rates of over 1,000%/year. Then, they connect with a number of bank employees, payment intermediary companies, and e-wallets to disburse and recover loans.

Some subjects disguise themselves as businesses, law firms, and financial companies to buy bad debts and uncollectible debts from lending apps, financial companies, and banks, then call to threaten and extort property.

The police force has destroyed a series of businesses hiding behind the scenes and handled the acts of property extortion, but the subjects have shown signs of disbanding, clustering, and operating at a slow pace, and the situation of making terrorist calls and sending text messages has shown signs of decreasing.

Some cases were cracked down by the police such as: Ho Chi Minh City Police cracked down on gangs disguised as Power Law LLC, Young Generation Law LLC, F88 Investment and Trading Joint Stock Company with debt collection departments with dozens, hundreds of employees, specializing in making threatening calls, terrorizing borrowers and their relatives. Up to now, 64 defendants have been prosecuted for the crime of extortion.

Conference scene

In Hanoi , the police force also fought a special case to destroy a gang hiding behind 07 companies with 119 employees working to collect debts for hire. In which, each month, employees are assigned to collect 300 million VND in debt, if they do not meet the target for 02 consecutive months, they will be fired.

From July 2018 to the end of 2022, this gang has collected debts of 571 billion VND, receiving commissions of 485 billion VND. To date, 36 defendants have been prosecuted.

Bad debt and debt explosion are a headache, consumer credit is shrinking

Mr. Nguyen Quoc Hung, Vice Chairman and General Secretary of the Vietnam Banking Association, said that the bad debt ratio of consumer loans is on the rise.

In addition to the objective factors with common difficulties, there are also subjective and very dangerous factors that have not been dealt with, such as customers intentionally not paying their debts, the previous person advising the next person not to pay their debts, even when company officials come to collect debts or remind them to pay their debts, they oppose, denounce, and slander the officials as using aggressive measures to collect debts from the government.

Groups that encourage each other to "default on debt" are widespread on social networks, causing many consequences for credit institutions but are not handled... All of the above makes debt collection activities, especially consumer credit debt of credit institutions, encounter many difficulties. Some credit institutions are forced to proactively cut down their consumer loan portfolios to avoid bad debt from continuing to arise.

Leaders of the Banking Association cited data that by the end of September 2023, outstanding consumer loans in the entire system had only increased by about 1.53% compared to the end of 2022 (a very low increase compared to the past 5 years).

Of which, the lending of the finance company group alone only reached 134,279 billion VND. Thus, compared to the end of last year, the credit of the finance company group decreased by 33%.

The bad debt ratio in consumer credit across the system is up to nearly 3.7% of total outstanding consumer credit, while from 2018 to 2022, this ratio was only around 2%.

Even the bad debt ratio of financial companies is at risk of increasing above 15%, many companies are in difficult situations, even suffering losses due to having to set aside high provisions for bad debt risks.

To limit the situation of black credit and illegal debt collection, experts said it is necessary to propagate and raise people's awareness; at the same time, review and overcome loopholes in regulations and business processes of credit institutions.

In particular, one of the important solutions is that the banking industry must effectively apply the National Population Database, thereby cleaning up and eliminating "virtual" bank accounts, helping to shorten the time and procedures for granting credit to people...

The population database system needs to combine the CIC credit scoring system and be based on big data... When people understand that having a low credit score will lead to consequences such as difficulty accessing credit, higher interest rates... then their perception will change.

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