Business / Markets

As bad loans increase, so do private debt-collection companies

By WU YIYAO/JIANG XUEQING (China Daily) Updated: 2016-02-29 07:32

No wonder, Shanghai China Promise's staff strength rose from 120 to 500 in the last two years. It plans to hire more in the next few years.

A report by China Orient Asset Management Corporation, which manages bad loans, said NPL may continue to grow in China into 2017.

By the fourth quarter of 2015, the NPL ratio of China's commercial banks reached 1.67 percent, up 8 basis points quarter-on-quarter.

The uptrend started in the second quarter of 2013, according to data of the China Banking Regulatory Commission.

By the end of 2014, China's commercial banks were staring at more than 35.76 billion yuan in bad loans of credit card-holders alone, up 42 percent year-on-year, according to the China Banking Association's latest annual report on credit card development in China. The report was released in July 2015.

While China Promise's debt collector Li continues to make phone calls despite her hoarse voice, some of her colleagues may visit errant debtors for a face-to-face confrontation and to urge them to repay within a given time (usually seven days).

If they still don't repay, debt-collection agencies, working in tandem with law firms, will use legal remedies like dispatching lawyer notices, or even filing lawsuits.

"Everything must be legal and transparent, and every phone call, visit and written materials are recorded. Otherwise, we'll be no different from hooligans," said Li, laughing.

She sees her job as an essential role that helps build a society with better credit.

Agrees Xiao Bo, founder of Zero and One Internet Technologies Co Ltd, a Beijing-based enabler of trading in non-performing assets. Banks, he said, typically contract out some well-specified, totally legal debt-collection functions to external agencies.

Such tasks may include making phone calls and visiting a debtor's home. If debt-collection agencies exceed their remit or violate the law, banks cannot be held responsible, although their reputation may get besmirched.

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