Loan sharking: An old scenario, new victims.
Loan sharking, with its enticing promises of high interest rates, has become a dangerous trap for many people in Nghe An province over the past decade, creating a persistent source of suffering for the community. It is noteworthy that despite numerous warnings from the press and media, this tragedy continues to occur, highlighting the urgent need for stricter and more effective management measures.
STRICT MANAGEMENT MEASURES
Over the past five years, Nghe An province has continuously witnessed cases of debt default related to illegal lending, causing much suffering to the community, typical examples include:
The nearly 100 billion VND debt default in Cua Lo and Nghi Loc towns (2017): Sisters Tran Thi Oanh and Tran Thi Xuan raised capital from local people with high interest rates.
The Hung Thao gold shop incident in Con Cuong town (2020): The Hung Thao gold shop in Con Cuong town declared bankruptcy, with the amount involved reaching tens of billions of VND. Hundreds of people were affected after depositing money hoping to earn high interest rates.
The incident in Quynh Long commune, Quynh Luu district (October 18, 2024): Hundreds of people gathered in front of the house of Ms. Bui Thi Nhung, one of the major fundraising figures in the area, with the promise of high interest rates.
These cases clearly illustrate the terrible consequences of illegal lending. Although they occurred at different times, they all share a common scenario: raising capital from people with promises of high interest rates, then declaring bankruptcy when unable to maintain the funds to pay the interest.
Loan sharking not only causes financial losses but also leaves deep emotional scars on the entire community. Lenders, from households to individuals, face the prospect of losing all their assets, leading to severe psychological distress. Many have lost their life savings, even mortgaging assets like land titles and borrowing more money to invest in these schemes.
The consequences extend beyond financial loss; it also shatters family and friendships due to financial stress. Many people are forced to leave their hometowns to find work and rebuild their lives. Others find themselves in a desperate situation, living in fear and pressure from loan sharks demanding repayment. This has plunged many families into destitution and created social instability.
LEGAL LOOPHOLES THAT NEED TO BE ADDRESSED
Debt defaults related to illegal lending in Nghe An not only reflect a lack of financial management awareness among the people but also highlight legal loopholes in controlling underground lending activities. Many fraudsters exploit people's trust, organizing unofficial lending operations with interest rates far exceeding legal regulations.
Article 468 of the 2015 Civil Code stipulates that interest rates on loans must not exceed 20% per year of the loan amount, unless otherwise specified by law. Lending by illegal lenders at interest rates higher than this is a violation of the law.
According to the 2015 Penal Code (amended and supplemented in 2017), Article 201 stipulates that the crime of "usurious lending in civil transactions" can be punishable by imprisonment from 6 months to 3 years if the illicit profit is 30 million VND or more.
Decree 144/2021/ND-CP: Stipulates administrative penalties for violations such as usurious lending and unauthorized fundraising, with fines ranging from 20 to 100 million VND.
Underground lending activities are often secretive, difficult to detect, and frequently disguised as legitimate transactions such as property purchase or lease contracts. Furthermore, many people lack legal knowledge and are attracted by high interest rates without fully understanding the potential risks. This creates opportunities for illegal lending to thrive, leading to serious consequences for society, such as debt, property loss, and economic instability in the community.
The lack of close coordination among relevant agencies also makes the investigation and handling process slow and complicated. Those involved in illegal lending often use sophisticated tactics such as collecting interest upfront (around 10 days) and withholding borrowers' personal documents, making it difficult for authorities to prove usurious lending practices.
COORDINATION IS NEEDED BETWEEN THE GOVERNMENT AND FINANCIAL INSTITUTIONS.
1. Monitoring and handling violations:Authorities at all levels must improve the effectiveness of supervision, ensuring that usurious lending practices are detected and dealt with promptly. This requires close coordination between functional agencies such as the police, judicial agencies, and local authorities, in order to implement preventative measures at the root. This will not only protect citizens from financial risks but also deter usurious lenders and reduce the growth of illegal lending.
2. Dissemination of information through media channels: DThis is a crucial factor in raising public awareness of the risks of illegal lending. Therefore, the government needs to organize workshops and communication programs to provide information on legitimate lending methods, how to recognize fraud, and how to protect one's rights. This will help people, especially in rural areas, gain a clearer understanding, thereby reducing the risk of being scammed and finding safer loan solutions.
3. Expanding formal credit channels:Formal financial institutions need to fulfill their role in providing safe credit products with reasonable interest rates, while minimizing complicated procedures to make them easily accessible to the public. Expanding lending channels from banks or social credit funds will help people avoid resorting to illegal lending when facing financial difficulties. This not only helps people steer clear of illegal lending but also creates long-term economic stability for the community.
4. Develop financial support programs for rural and mountainous areas:For areas with limited access to financial services, bringing loan support programs closer to the people is crucial. Banks and financial institutions should cooperate with local authorities to implement microcredit programs, enabling people to borrow small amounts of money at preferential interest rates. This not only creates opportunities for sustainable economic development but also reduces the risk of people being drawn into illegal lending schemes.
Cases of defaults due to predatory lending are not merely financial issues, but also lessons about the need for stricter control and increased public awareness of financial risks. By implementing coordinated legal measures and support from financial institutions, we aim to build a healthier economic environment, preventing tragedies like predatory lending from recurring.
