A woman passes by a vehicle with a debt collection ad and service telephone number on it. Photo: CFP
The debt collection business has been in the spotlight again recently after media reports that some debt collection companies sold people's personal information after they failed to collect overdue debts for banks.
Li Yihang, manager of a debt collection firm in Kunming, Southwest China's Yunnan Province, obtained a list of people with bank debts from a printing firm who had bought it from a local debt collection company after it failed to collect the overdue money for its bank clients, Yunnan Information Daily reported on December 25.
The list contained the information of almost 600 debtors, including their names, IDs, home addresses, contact numbers and the amount that they owed to the banks, the report said.
According to Li, some debtors on the list owed up to 200,000 yuan ($31,800) to banks and the information for each debtor was sold for 20 yuan, the report said.
This is not the first time debt collection firms have been embroiled in scandal. There have been many media reports of debt collection agencies resorting to extreme measures such as intimidating phone calls and even violence to get people to pay their debts.
Wuhan Evening News, a newspaper in Central China's Hubei Province, reported in November that a man surnamed Tao complained to the paper that China Everbright Bank disclosed his information to a third party.
Tao borrowed 50,000 yuan from a local insurance firm through a China Everbright Bank outlet in Wuhan and was expected to repay 3,000 yuan a month over a period of three years.
In September, he failed to repay the debt on time and days later, two men came to his door to collect the money he owed and asked him to pay 500 yuan for the "door-to-door" debt collection service. The two men later damaged the lock to Tao's door and sealed it up with glue, the report said.
Debt collection boom
Debt collection companies have grown more numerous across China in recent years as the country's economy has boomed, and especially with the rise in use of credit cards.
There is no official data on how many debt collection firms are currently operating in China, as many of them are registered as "consulting firms." But information and adverts for debt collectors are widely circulated.
A human resources manager surnamed Bao at Gold Partners (Shanghai), a consulting firm that advertises online as a debt collection business, told the Global Times that the company helped some State-owned companies and joint-stock banks collect credit card debts.
"Banks' non-performing assets are rising now, but their core business is not about urging debtors to repay their loans and collecting it. So they need to outsource the service to us," Bao said.
"Collecting debts does not always go well. It requires good communications and faith, and as a professional company we cannot resort to violence or illegal means," he said.
According to Bao, the company only hires debt collectors who have sufficient experience and ability to bear pressure, because they usually have to face individuals who have not paid for more than three months, and even gamblers and drug addicts.
"Sometimes debtors verbally abuse our debt collectors, and if we press too hard for repayment, some debtors even commit suicide. Our debt collectors have to face the darkest side of society," Bao said.
All their debt collectors receive training in terms of legal knowledge and communication methods before they start working, according to Bao.
Dong Junmin, chief operation officer of CBC Credit Consulting Co, which specializes in credit card debt collection, told the Global Times that banks have tightened their requirements for debt collection agencies and do not permit excessive pressure.
Debt collection is still an emerging sector in China, and those firms that use illegal means and tarnish the image of the industry will be weeded out eventually, Dong said.
Legal or not?
Interview requests sent by the Global Times to several major banks were not returned.
A staff member at the press office of Industrial and Commercial Bank of China told the Global Times that the bank does not outsource debt collection because the bank has a risk management department that deals with debt-related issues.
"If the company outsources debt collection to other agencies, we cannot guarantee the quality and conduct of the debt collectors," the staff member said on condition of anonymity.
Xu Feng, a lawyer at Shanghai Huarong Law Firm, told the Global Times that banks usually have their own team responsible for collecting debts.
"But when banks fail to get their debt repaid after their team presses debtors several times, they outsource the business either to law firms or debt collection companies," Xu said.
According to Xu, the business of helping banks collect debts is popular with law firms because they can receive up to 30 percent of the debt they collect.
Wu Weifeng, a lawyer at Henan Tomorrow Law Firm, said that many banks entrust debt collecting to law firms, which then call in the services of debt collection companies.
"It's legal for banks to outsource debt collection to law firms but the law firms should only use legal means, such as making proper calls, sending text messages or letters to debtors to press for repayment," Wu said.
According to Wu, if people still refuse to pay their debts after repeated reminders, banks have the right to take the issue to court, which can lead to seizure of the debtors' property and freezing their bank accounts.
But things can get out of control if banks or law firms outsource the business to debt collection companies because these companies may use extreme means to put pressure on debtors, Wu said.
"One of the major reasons for the booming debt collection business in China is that banks have issued too many credit cards," Zhao Wanyi, a professor at the Southwest University of Political Science and Law in Chongqing, told the Global Times Wednesday.
Chinese banks had issued a total of 318 million credit cards by the end of September, up 18.8 percent up from a year earlier, data from the central bank showed in November.
In the third quarter of 2012, credit card loans that were overdue for more than six months rose by 8.8 percent quarter-on-quarter to 14.43 billion yuan, accounting for 1.4 percent of all credit loans outstanding at the end of September, the data showed.