Banking & Finance

China to create national name-and-shame system for ‘deadbeat borrowers’

Anyone who fails to repay a bank loan will be blacklisted and have their personal details made public

PUBLISHED : Tuesday, 10 October, 2017, 8:03pm
UPDATED : Tuesday, 10 October, 2017, 11:37pm

A system to name and shame “deadbeats” who fail to repay their bank loans will be rolled out across China by the end of the year, with anyone who defaults to be blacklisted and have their personal details made public.

In many Chinese cities, laolai, or “deadbeat borrowers”, are already publicly shamed in a bid to make them repay their loans.

Now, the Supreme People’s Court, the China Banking Regulatory Commission and the Communist Party’s Publicity Department have decided to make this a national policy, the official Xinhua news agency reported on Tuesday.

Those who fail to repay a bank loan will be blacklisted, and they will have their name, ID number, photograph, home address and the amount they owe published or announced through various channels – including in newspapers, online, on radio and television, and on screens in buses and public lifts.

Shanghai adopts facial recognition system to name, shame jaywalkers

Local governments have been told to set up name-and-shame databases – which will be searchable by anyone – by the end of the year, the report said.

These databases will be run by local media outlets, with the courts providing details of the debt defaulters and the banking regulator updating lenders on the blacklist.

The move is part of broader efforts to boost “trustworthiness” in Chinese society. The public shaming channels would serve as an “important tool in punishing those regarded as untrustworthy”, according to Xinhua.

In the southern city of Guangzhou, the personal details of some 141 debt defaulters have so far been displayed on screens in buses, commercial buildings and on media platforms at the request of local courts.

Meanwhile in Jiangsu, Henan and Sichuan provinces, the courts have teamed up with telecoms operators to create a recorded message – played every time someone calls – for those who fail to repay their loans. The message tells the caller: “The person you are calling has been put on a blacklist by the courts for failing to repay their debts. Please urge this person to honour their legal obligations.”

This was made possible by the introduction of a mobile phone real-name registration system this year, meaning all numbers registered under the name of the debtor will carry the message until the loan is repaid.

Why China’s latest bank reserve ratio cut comes with strings attached

Debt evasion has become a chronic problem in Chinese society, affecting judicial authority and credibility, according to Angela Luo, a lawyer with Gold Sun Law Firm in Guangzhou.

“The authorities have been coming up with measures to tackle this for years, but with little substantial result. A court verdict is nothing more than a scrap of paper to debtors on the blacklist,” she said.

Those measures include the central government back in 2005 setting up a database of debtors’ information – such as bank details, and business and property interests – to deter people from defaulting on their loans.

The top court in 2013 also started disclosing the personal details of “dishonest” borrowers who failed to repay loans. By June it had named and shamed some 7½ million people, the Supreme People’s Court said.

“All of these measures are aimed at putting debtors under more pressure by shaming them. But to be honest, the effects are limited when we’re talking about people who are totally ignoring the authority of the law,” Luo said.