A multi-billion dollar criminal lending scheme resulted in 89 deaths in China: CCTV

The scheme would trap people in illegal loan contracts that resulted in annual compound interests as high as 5,214 per cent.

One man borrowed 2,000 yuan (US$305) before eventually owing 700,000 yuan (US$107,000) in a vicious cycle of predatory lending.

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Police detain people suspected of being involved in a large illegal lending scheme in March 2019. CREDIT: Baidu

Published: 7:04pm, 29 Mar 2021Updated: 7:04pm, 29 Mar 2021

A gang of loan sharks in China caused the deaths of 89 people after the crime ring hired debt collection companies to harass and intimidate borrowers who had no feasible avenue to pay off their obligations, according to Chinese state broadcaster CCTV.

The gang, headed by a man named Wang Tao and based in the city of Lanzhou, in the northwestern province of Gansu, inked 3.36 million contracts with 475,000 people between March 2018 and March 2019.

The loan sharks gave out 6.27 billion yuan (US$960 million) of illegal loans. After interest, Wang’s gang had been repaid 9.11 billion yuan (US$1.4 billion) and owned an outstanding debt of 9.84 billion (US$1.5 billion), according to accounting books presented at the trials.

Police escort suspects of a multi-billion dollar illegal lending scheme into buses. 253 people were arrested during a dragnet in March 2019. Photo: Baidu

The gang implemented aggressive collection tactics blended with vicious interest rate schemes, believed to have contributed to the suicides of 89 people in China.

Wang’s illegal enterprise lured unsuspecting borrowers with enticing terms such as “interest-free for seven days” or “low threshold, fast loans” in contracts that often resulted in annual interest rates of between 1,303 per cent to 5,214 per cent if the borrower could not pay off their debt quickly. According to Experian, a credit rating agency, the average interest rate for an above-board personal loan is 9.4 per cent.

The crime ring, which had no lending license, would also issue what police call “trap loans,” which did not include terms for defaulting, which sometimes resulted in borrowers selling their properties to pay off debts.

The documentary said, “The fundamentals of the loan, also known as a trap loan, is you can not pay it off at all even though you go bankrupt. Under the disguise of a legal loan, every loan is a debt stained with blood.”

Wang Tao’s criminal lending scheme is believed to have contributed to the deaths of 89 people in China. Illustration: Tom Leung