Chinese ‘loan scam’ worth US$16 million leads to 250 arrests
Operation launched against online microcredit platform after claims by borrowers regarding harassment and high interest rates
Police in eastern China have cracked down on an illegal moneylending ring, arresting nearly 250 people said to have lured thousands of victims across the country into a microcredit scam that involved over 100 million yuan (US$15.6 million), a report says.
A total of 246 people were detained in the city of Taizhou in Zhejiang province on Saturday – the biggest gang of its kind that authorities in the province have uncovered, according to the police, news website ThePaper.cn reported on Sunday.
Microcredit typically takes the form of small loans with no collateral. Authorities became aware of the syndicate on April 26 after a college graduate in Wenling, a coastal city in the municipal region of Taizhou, reported it to the police.
The man had borrowed 1,500 yuan from an online lending platform in late February, which was actually a loan shark that asked for 500 yuan of interest per hour if repayment became overdue.
To pay the high interest, the man borrowed further from several online lending platforms, and by April the unpaid debt had exceeded 200,000 yuan because of the high interest and penalties, the report said.
He and his family received harassing phone calls and a threatening letter from debt collectors, even after he had paid more than 50,000 yuan.
It is the latest example of the easy availability of cash loans for China’s young, who generally lack financial literacy.
China’s online lending sector – regulated and unregulated – has boomed in the past decade since Beijing delegated the licensing of microcredit firms to local authorities.
Millions of people, long denied credit from established banks, suddenly found it easy and convenient to borrow money via their mobile phones.
The police targeted a so-called online information company in Fuzhou city, in Fujian province, which operated the online microcredit platform, sending more than 400 police officers from Zhejiang to make the arrests and take them back to Zhejiang, ThePaper.cn reported.