China has stepped up efforts to combat unauthorized and unregulated online loans usually charged at exorbitant rates of interest, which have resulted in some borrowers breaking the law to repay them.
A consumer scans an Alipay QR code to pay for the order at a self-service restaurant in Hangzhou, Zhejiang province.(Photo: Xinhua)
According to the Ministry of Public Security, by the end of last year, 41,000 people suspected of involvement in illegal online lending had been detained, with the total amount exceeding 57.7 billion yuan ($8.36 billion).
On Oct 18, a court in Linhai, a city in Zhejiang province, settled a major case involving such loans, in which the main defendant was sentenced to 15 years in prison and fined 800,000 yuan.
A man surnamed Lin went to the police in Wenling, Zhejiang, on April 26 when he was told to repay more than 200,000 yuan after initially borrowing just 1,500 yuan.
Lin borrowed the initial amount from an online loans company in Fuzhou, the capital of Fujian province, in February, and was told to repay the sum within five days, with a default charge of 500 yuan per hour. Moreover, he was ordered to write the company an IOU for 3,000 yuan.
After he failed to repay the loan on time, the company suggested that Lin borrow money from other platforms. By March 16, his debts had snowballed to more than 200,000 yuan.
The company kept calling Lin and contacts it found on his mobile phone, threatening to shame him on the internet. It was at this point that he turned to the police for help.
Cases: 41,000 suspects seized
In May and June, police cracked a criminal gang led by Wu Yongjie.
Wu, who was born in Sanming, Fujian, in 1989, built a network of 13 online loan teams by February 2018 and charged exorbitant rates of interest. He was convicted of fraud and racketeering, and more than 170 people involved in the case were all brought to justice.
However, Lin was not the only victim.
Wenling police said that in the past year, Wu's company had illegally loaned 290 million yuan to some 90,000 people. At least six of them committed suicide due to their snowballing debts and the company's illegal demands for repayment.
Wang Lili (not her real name), a 21-year-old senior student at a university in Shenyang, Liaoning province, committed suicide on May 19, 2018, after being forced by Wu's company to repay debts she couldn't afford. The company also threatened to harm her family.
Her older sister said the company took Wang's money and "destroyed her will to live in just one month".
Wang's debt stood at 3,500 yuan on April 25, 2018, but 23 days later, the company demanded that she repay 13,000 yuan. The daily rate of interest was set at 11.8 percent, and the annual rate was 43 times the initial amount, much higher than the rate allowed by the Supreme People's Court.
With little knowledge of the law, many of the company's victims had no reason to doubt that it was qualified to issue loans.
Sun Lei, deputy director of Wenling public security bureau, said many of the victims did not take the interest rates seriously at first. But once trapped, they found it hard to extricate themselves.
According to a report in Caixin Weekly, after he was convicted, Wu said he did not realize that lending money at such a high rate of interest was a crime. Instead, he said the business was driven by market demand.
From April to October, the Supreme People's Court, the Supreme People's Procuratorate, the Ministry of Public Security and the Ministry of Justice jointly released several documents related to cracking down on and containing criminal organizations. The documents clarified the differences between illegal loans and private lending, as well as measures to be taken against usury and "soft violence" in debt collection.
Jiang Wei, vice-president of the Supreme People's Court, said at a news briefing in April that loans offered at exorbitant rates of interest that trick borrowers into a "bottomless pit of debt" are, in reality, fraud disguised as private lending.
Grace period offered
According to a guideline released by the Supreme People's Court this month, leniency in the form of a one- to three-month grace period will be shown to wrongdoers on credit blacklists who are restricted from buying certain products and services for defaulting on court orders.
Students who lose their creditworthy status after falling victim to illegal campus loans will be exempt from being placed on such blacklists or from being restricted from buying some goods and services, according to the guideline.
The document said wrongdoers' children are not allowed to attend schools that charge high tuition fees.
In cases where such restrictions are imposed, courts should communicate with young children and their schools to avoid any "negative effects", the document said, adding that the punishment should not affect their legal right to an education.
Credit blacklists will be made public if wrongdoers continue to default on their court orders after the grace period, the document said.
Such periods will be granted based on the "determination of defaulters to fulfill their duties" and on the severity of their cases.
As of July 9, more than 14.5 million people in China had been placed on credit blacklists for defaulting on court orders.
Lu Jianping, a law professor at Beijing Normal University, said illegal loans jeopardize social and economic order and pose challenges to legal work.
"Authoritative documents are of great significance in dealing with such cases," he said.
Li Youxing, a professor at Zhejiang University, said, "The judicial authorities should draw up and improve laws and regulations against illegal loans."
Measures to avoid fraud should be taken by market players and individuals and they should use the law to protect themselves, Li said.
Last year alone, 141 suspects involved in illegal online loans appeared before city and district courts in Ningbo, Zhejiang, with 36 of them sentenced to more than five years in prison.
Liu Zhongyi, director of the Ministry of Public Security's Criminal Investigation Bureau, said at a news conference late last month, "To date, the number of illegal online lending platforms has dropped by 77 percent nationwide."