Sharing vision - Bringing Empowerment

Struggling with "Black credit"

  • Perform: My Hanh (Translator: Anh Nguyen)
  • 25/04/2022

The economic difficulties during the prolonged Covid-19 pandemic have led to many people resorting to black credit and its tempting advertisements without anticipating the misfortune that could follow after they are caught in this trap. The following story is a wake-up call for each and every one of us to stay away from the unpredictable tricks of black credit. 

The prolongation of the Covid-19 pandemic and the lack of knowledge have cornered many people into a vortex of exhaustion and debts. Ms. Chau, a person with a leg defect, also happens to be in this vortex. 

A traffic accident at the age of 16 took away her left leg, resulting in her education being left unfinished after months of medical treatments. As the family's finances slowly declined, she had to rush herself into finding work to help her parents make the family's living. Despite her many efforts, she couldn't work stably due to her leg defect. It was until she was 24 that Ms. Chau finally got hired to work long-term at an embroidery company near her home. She soon became the family's main provider when her parents grew old and ill, while her sister was still in school. The family's income was solely dependent on their farmland and her salary. 

The crisis came when she was on the labor cut list because the company was forced to scale back their production during the Covid-19 pandemic. She was really distressed when thinking about what would happen then, she didn't know what could be next. Her monthly social allowance was only enough to cover a portion of the family's expenses. The money that the authorities supported was also just enough to get her family by for a short period of time! She always applied whenever there was a post recruiting seasonal workers, but the income was unstable. 

Since there was no other way, she went everywhere, asking to borrow money, but was unsuccessful. Procedures to get bank loans were too complicated, and she must be able to prove her ability to pay off the debts, which was a requirement difficult to meet for her family. A friend suggested: “Borrowing money through mobile apps or websites is much simpler, the interest rate is low, the loan application process only takes 10 minutes on the phone. Afterwards, the money is sent to the account, no evaluation needed.”. Then they told her to look for a loaning place online, using the keyword borrowing money through apps or websites. 

Following their instructions, she found out that: There were apps approving a loan amount of 1.7 million VND for first-time borrowers, but they could only receive 1.4 million VND, while 300,000 VND was counted as a service fee. Within the next 8 days, the borrowers must pay back 2.1 million VND (including 1.7 million VND of the original loan and 400,000 VND in interest). If they failed to meet the deadline, they would be fined 110,000 VND per day. As for another type of apps: After repaying the first loan on time, borrowers could be approved of a loan amount of 3 million VND, and within 30 days from the date of the loan, the borrowers must pay back 4.6 million VND (including 3 million VND of the original amount and 1.6 million VND in interest). If they were unable to pay back on time, they would have to pay 600,000 VND to extend the repayment period. All apps required the borrowers to create accounts and provide personal information, such as photos, identity cards, phone numbers, addresses,... and the lenders would guarantee to protect the confidentiality of the information. The borrowers must agree to the terms of the digital contract that was prepared by the apps, which forced the borrowers to allow the apps to have access to their contacts, social media accounts on their phones. If the borrowers managed to meet all the loaning conditions, the company's account system then would automatically transfer to the borrowers' personal accounts. Although the interest rate was quite high, these loaning apps and websites had an advantage of having very simple and quick procedures, which directly hit the borrowers' preference of getting money quickly. After a short period of consideration, Ms. Chau followed the instructions to borrow some money. At first, she borrowed a small amount of money and paid it back on time. However, when the pandemic situation went on longer, the family income became minimal while the expense needs didn't decrease, despite the family's efforts to cut down as much as possible. The next time, Ms. Chau had to borrow 8 million VND from an X app. When she didn't have the money to pay back on time, this app's staff recommended that she should borrow money from other apps to make up the repayment. After two months, the interest grew more and more, just from the original 8 million VND loan and an interest rate that increased exponentially everyday, Ms. Chau is now suffering from a debt worth of 40 million VND. When she failed to repay in time for the deadline, the debt collector phoned to curse at her and threatened to get everyone she knew to pay back the money... Overwhelmed with fear, she ran everywhere to look for a way to pay off the debt... 

In the midst of chaos, she was told a hint: “The lamp posts outdoors are stamped with many posters advertising collateral-free loans with very low interest rates, even to 0%, why don't you contact them?”. Ms. Chau then hurriedly went looking for those “credit lamp posts" and called the number on the flier that she found most suitable. The other line picked up and asked for her address so they could come by and give direct consultation. The next day, a man named Duong, who claimed to be a financial support worker, came to her house. Duong said that his company specialized in providing support for people who needed to borrow money but couldn't qualify for a bank loan. In the evening, Duong sent an address and time, and told her to bring her original household registration, identity card, the most recent electricity and water bills to prepare for appraisal. Following the provided date and address, Ms. Chau brought the requested papers. After reviewing, Duong told her that she was eligible for a loan, then made copies of her papers as well as a contract without asking anything about her job or her ability to repay?! Duong gave her a draft loan agreement with nonspecific information: the loan amount was 40 million VND, the agreed interest rate was not contradicting regulations. However, the interest rate that Duong verbally discussed with her was at 5,000 VND per million per day, and would be paid monthly, with one month equal to 30 days. If the loan period wasn’t enough to be counted as months, Duong would start calculating the interest rate from the day after the loan date to the date of interest payment, no date of loan repayment would be set. If Ms. Chau couldn't pay the interest on its due date, this interest amount would be added to the original loan and the next interest amount would be formed from this new total... She mentally went back and forth between deciding to borrow and deciding not to. Because if she borrowed but couldn't manage to repay on time, the interest rate from the 40 million VND could roughly be around 200,000 VND per day?! But then under the pressure of the debt collectors from the online loan apps, she had no choice but to decide to borrow money. She would rather borrow from Duong to repay the loan apps, then borrow from them again to repay Duong, than go to jail. Fortunately, with the advice from a neighbor, she recorded the entire discussion between her and Duong. Then she blindly signed the loan agreement. After receiving enough money from Duong, she paid off her debts to the online loan apps. However, to repay Duong the heavy loan amount of 40 million VND with an interest rate at 200,000 VND per day, she was forced to continue borrowing money from online loan apps. Consequently, she sunk herself deeper and deeper into the seemingly never-ending loop of having to borrow from one place to repay another?! But whenever she signed up for a loan on the apps, they notified her that she wasn't qualified ???!!!. The date of repayment for Duong was coming closer and closer, causing her to become restless. The family was only counting on a pregnant cow, but it had to be at least another year before the family could sell the calves to get money to pay off debts. The first date of repayment came, Ms. Chau phoned to ask for a reprieve, promising to repay the new interest after adding the old one to the total loan amount, just as previously discussed, but Duong flatly refused. After she failed to repay for two months, Duong continuously phoned to ask about the money. He told her to think about selling her house to pay off the debt, or else her family wouldn't be able to live in peace and she would be in jail. Her family's life turned into a living hell as Duong constantly called to terrorize them over the phone everyday, even sending people to come barge on her door to get the money. The following week, she received a notice from an unspecified law firm who claimed to have sued her to court and was then awaiting for the court's verdict. Holding the notice in her hands, her whole body trembled and she collapsed... 

Contemplating for a long time, she wiped away the tears and headed straight to see Ms. Cam, the President of the Association of Persons with Disabilities in her commune, to ask for help, because she was already at the end of her wits. Listening to her situation, Ms. Cam advised Ms. Chau to report to the police. After many days of thinking, she decided to follow Ms. Cam's advice. She knew she definitely had to repay the money that she borrowed but she couldn't let her loved ones be threatened forever. With a denunciation letter, she handed over the evidence of the events to the police. A few days ago, she was notified that she was a party with rights and obligations related to Duong's usury case. Despite of what may happen in the future, Ms. Chau now has learnt a costly lesson about “black credit"... 

Article 468 of the Civil Code 2015: Interest rate 

1. The rate of interest for a loan shall be as agreed by the parties.

The rate of interest for a loan agreed by the parties may not exceed 20% per year, unless otherwise prescribed by law. According to actual conditions and at the proposal of the Government, the Standing Committee of the National Assembly shall adjust the above interest and send a report to the National Assembly at the latest session.

If the agreed interest exceeds the maximum interest prescribed in this Clause, the agreed interest shall become invalid.

2. Where parties agree that interest will be payable but fail to specify the interest rate, or where there is a dispute as to the interest rate, the interest rate for the duration of the loan shall equal 50% of the maximum interest prescribed in Clause 1 of this Article at the repayment time. 

Article 201 of the Criminal Code 2015, amended and supplemented in 2017: Usury in civil transactions 

1. Any person who offers loans at an interest rate that is five times higher than the maximum interest rate specified in the Civil Code and earns an illegal profit of from VND 30,000,000 to under VND 100,000,000 or previously incurred a civil penalty or has a previous conviction for the same offence which has not been expunged shall be liable to a fine of from VND 50,000,000 to VND 200,000,000 or face a penalty of up to 03 years' community sentence. 

2. If the illegal profit is VND 100,000,000 or over, the offender shall be liable to a fine of from VND 200,000,000 to VND 1,000,000,000 or face a penalty of 06 - 36 months' imprisonment. 

3. The offender might also be liable to a fine of from VND 30,000,000 to VND 100,000,000, be prohibited from holding certain positions or doing certain works for 01 - 05 years.