Consumer lending is facing difficulties due to rising bad debt

On October 31, VTVMoney - Vietnam Television organized a workshop on "Resolving difficulties in consumer lending - Repelling black credit". The workshop aimed to find solutions to support the healthy development of the consumer credit market, becoming a channel to provide capital for the legitimate needs of people, especially low-income workers.

According to the latest data from the State Bank, as of July 31, 2023, outstanding loans for living expenses reached VND 2.6 million billion, up 2.93% compared to the end of 2022, accounting for 21.31% of outstanding loans in the economy. Compared to the 22% increase in the whole year of 2022, the figure of 2.93% in the first 7 months of this year is too modest. The above data shows that the consumer lending market in Vietnam still has a lot of potential for development when people's demand for consumer loans is very large.

It can be said that in the context of economic difficulties, financial companies have strictly followed the direction of the State Bank to organize and implement consumer loans for substandard subjects to meet the minimum consumption needs of low-income workers to limit and gradually push back black credit. However, up to now, almost all financial companies have encountered many difficulties due to increasing bad debts, debt collection officers quitting their jobs, and financial companies cannot continue to expand lending.

Mr. Le Quoc Ninh - Chairman of the Consumer Finance Club said that consumer credit is in the most difficult period in the past 15 years. Outstanding loans of consumer finance companies as of the end of June 2023 decreased by 10.2% compared to the end of 2022. Bad debt of finance companies also increased from 10.7% at the end of 2022 to 12.5% at the end of June 2023 - according to statistics of Fiingroup.

“In Vietnam, there are 16 licensed consumer finance companies, but the positive values that these companies aim for are being diluted by hundreds of black credit companies,” Mr. Ninh emphasized.

Many experts believe that some subjects take advantage of the management agency's crackdown on black credit crimes and deliberately accuse consumer finance companies licensed by the State Bank of being black credit organizations, so they do not pay their debts and set up debt default groups on Zalo, Facebook... but are not handled. This situation leads to an increase in bad debts of consumer finance companies, debt collection officers quit their jobs, financial companies cannot continue to expand lending, in fact, outstanding debts do not increase but decrease. As a result, black credit has begun to rise, although state management agencies have actively cracked down on many black credit groups, the situation is still very complicated in many sophisticated forms, especially in the online environment.

According to Major Nguyen Ngoc Son - Deputy Head of Department 6, Criminal Police Department (Ministry of Public Security), recently, the police force has prosecuted 90 cases with more than 400 defendants involved in illegal credit activities. Among them are many gangs operating related to high technology, even including foreigners who came to Vietnam to establish companies and then hire Vietnamese employees. Illegal credit activities are mainly conducted in cyberspace and lend money at interest rates of up to thousands of percent per year. The loan amount is very small, but when combined with interest and fees, the amount the borrower has to pay is very large.

"When participating in borrowing from apps or mortgaging through apps, the possibility of information leakage allowing subjects to take advantage of it to carry out acts of intimidation and debt collection in violation of the law is very high. Therefore, we recommend that people need to access finance through official channels," said Mr. Son.

Regarding the form of punishment, according to Lawyer Nguyen The Truyen - Director of Thien Thanh Law Firm, if you owe money, you have to pay it. The act of defaulting on debt can be punished from administrative to criminal levels. Forming a group of people who intentionally provide false information can be handled and punished administratively. If there is an intentional violation, the criminal element can be considered for the crime of abusing trust to appropriate property. Thus, the regulations for punishing this act are complete.

In the National Comprehensive Financial Strategy to 2025, with a vision to 2030 approved by the Prime Minister, there is an emphasis on developing consumer loan products suitable for consumer borrowers, with reasonable interest rates.

Recently, the Prime Minister also issued Official Dispatch No. 766/CD-TTg on strengthening solutions to prevent, stop and handle "black credit" activities. In particular, it emphasized the specific tasks of each ministry and sector to prevent illegal lending and debt collection activities, affecting security and social order. At the same time, it expanded official and legal lending channels, helping people access capital more conveniently.

According to experts attending the workshop, it is necessary to promote economic development, stimulate consumer demand; strengthen communication activities on formal consumer credit; coordinate with local authorities to deter customers who do not pay debts; research and develop a legal corridor for professional debt settlement contracts; apply a separate bad debt threshold for financial companies; build a blacklist database at credit institutions.../.

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