HCM CITY ­— The recent rise in ‘black credit’ has trapped individuals and families in big cities of Hà Nội and HCM City as well as other provinces. When approaching this source of funds, most borrowers fall into the high interest trap and ‘forest law’ constraints.

This form of lending has been flourishing in HCM City and neighbouring provinces such as Đồng Nai, Bình Dương and Long An, reported Đời Sống và Pháp Luật (Life and Law) newspaper.

Notably, the high-interest loans were offered from financial companies, the paper said.

Simple procedures, quick disbursement

Understanding the desperate situation of those who need loans, a number of loan sharks have sprung up around the country. When signing up for these loan agreements, the debtors agree to many unfavourable conditions.

The newspaper’s investigations have discovered variety of tricks employed by loan sharks. 

Posters advertising loans without collateral and simple procedures appeared on walls and electricity poles around cities.  

In Hà Nội, on streets such as Hòe Nhai, Tạ Quang Bửu, Yên Phụ or Đê La Thành, people were easily lured by leaflets on electrical cabinets and poles. 

Reading the posters, it seemed that borrowing money had never been so easy. 

According to these ads, people just need to show their residential registration books and IDs to get a loan of between VNĐ10 million (US$430) and VNĐ100 million ($4,300) if the borrower had a house. Money would then be disbursed in just 15 minutes.

The procedures were simple and fast. And lenders would even send their staff to borrowers’ homes to collect interest periodically.

These simple procedures have attracted poor people who did not have collateral, which is required by banks to get loans.

Generally, borrowers of ‘black credit’ have to pay daily interest with super-high rates.

According to the paper’s investigation, on a VNĐ50 million ($2,200) loan over 40 days, the borrower had to pay an interest of VNĐ1.5 million ($65) a day. This means the interest rate is about 30 per cent per month or 1 per cent per day.

A loan shark in Gò Vấp District of HCM City has applied a cut-throat interest rate of 500 per cent per year for a VNĐ100 million loan.

As per regulations in the Civil Code in 2015, loan interest could not exceed 20 per cent per year. 

Besides the super-high interest rates, loan sharks collected a fee called fast money service. 

It means if a person takes out a loan of VNĐ10 million, he or she would receive VNĐ9 million after being deducted VNĐ1 million, or 10 per cent, as a fee. However, the interest rate is still levied on VNĐ10 million.

This fee varies depending on different loans.

“When I was not able to pay the interest, I asked them to let me pay the principal to deduct daily interest but they refused,” said a man named Hùng, a resident in Tân Phú District.

“As such, the debt was swelling day by day. I had to sell my house but also could not pay off all debts,” said Hùng.

The loan sharks have appeared everywhere and they were willing to lend without collateral and then profit from the poor, the paper said.

“After just a few days without paying, interest-on-interest would rise,” said Nguyễn Huy Khang, a resident in HCM City’s District 12.

“At that time, gangsters and thugs would come to houses to threaten debtors by spraying paint, shrimp sauce or faeces on their homes. Even beating family members,” he said.

“It was a living hell,” he added.

Tricks

‘Black credit’ is available at a number of places, including pawn shops.

The service employed several kinds of tricks to appropriate the mortgage properties of borrowers.

In Hà Nội and HCM City, there are thousands of pawn shops with attractive marketing.

Along with high interest rates, most pawn shops offer short term pawns ranging from one to two weeks.

“This was the way to ‘kill’ the borrowers quickly,” said Nam, who used to work in a pawn shop.

“Because in one or two weeks, most customers would not have money to redeem the pawned items, while the interest would rise,” Nam said.

Therefore, many borrowers lost or spent more money to take back the property, he said.

In Hà Nội and HCM City, thousands of pawn businesses accept assets of unknown origin or stolen items. 

Recently, authorities have cracked down on many ‘black credit’ entities. 

Over the past five years, Hà Nội Police have wiped out 54 gangs involved in this type of activity.

Last month, the police dismantled the biggest loan shark - Nam Long Finance Company.

The company has 26 branches nationwide and was offering loans with yearly interest rates of more than 100 per cent, with some at 1,000 per cent. When borrowers are late in paying the interest, they will be threatened, harassed, assaulted and have their properties stolen by the company’s employees.

More than 200 people across Việt Nam have been trapped by the loan shark, with total loans worth more than VNĐ510 billion ($22 million). 

Hà Nội People’s Committee has recently asked relevant offices to halt granting licences to pawn shops and financial service businesses which were actually loan sharks so as to reduce criminal cases in the city. — VNS