Friday , June 21 2024

Debt evasion headache for financial firms

Rising bad debt from “disappearing” borrowers and the shutting down of unauthorized debt collecting agencies are damaging the reputation of legal financial companies and threatening to hurt their performance.

FE Credit, Vietnam’s top consumer lending firm, is struggling to collect debts as many borrowers are deliberately defaulting on their loans, said Ho Thi Nhu Ha, deputy CEO.

In recent months social media groups that advise people on how to borrow from financial companies without paying are mushrooming with up to hundreds of thousands of members.

Many members show each other how to use a pre-registered SIM card, which does not contain the authentic personal information of the subscriber, to borrow loans from different companies, and then disappear without getting caught.

Ha said that the current laws do not have high fines for this type of fraud, especially when the defaulted amount is of low value.

This is why there is a growing number of cheaters who even charge others a monthly fee to assist them in cheating.

Another consumer lender, PTF Vietnam, is also seeing a surge in unpaid loans, as many customers falsely believe that “not paying back a loan is the right of borrowers while collecting debts is illegal,” a media representative said.

“In the last three months we have been reducing giving new loans and only focusing on customers with good credit scores,” the representative added.

Difficulties seemed to increase for financial service firms with the recent arrests of individuals who set up companies and hired hundreds of employees to buy debts from lenders and threaten borrowers with death and defamation if they do not pay.

Le Quoc Ninh, CEO of financial firm MB Shinsei, which operates the Mcredit loans platform, said that many illegal financial companies are trying to confuse customers by telling them that they have operational licenses.

This creates a negative image of financial companies to the public and could affect payment as it will be even more difficult to collect debts, he added.

Ha of FE Credit said that many employees have quit due to the fear that they might be arrested, even though leaders have assured them that there is no need to panic if they do not break regulations.

Shinhan Finance employees also said that when they call borrowers to ask for repayment, they threaten to make a complaint to the police. This discourages the employees.

Ninh said that if the government does not impose strict fines on borrowers who fail to pay back their loans, authorized financial companies will face challenges in providing loans and this will rob low-income people, such as factory workers, of the opportunity to access loans.

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