Vietnam: Consumer credit needs a legal framework

Never have consumer loans been in difficulty as recently. The demand of borrowers was great, but finance companies did not dare to increase lending because of worry about the difficulty for debt collection.

HÀ NỘI — It is critical to develop a proper legal framework for consumer credit to protect the legitimate rights of both borrowers and lenders.

Ngô Xuân Duy from Vietnam International Debt Trading Company said that the existing legal framework was inadequate and lacked transparency, causing difficulties for the operation of companies in this field.

The mechanism for lending and debt collection related to consumer credit was not complete, which was negatively affecting the market, he said. “We are still confused about how to make a debt reminder phone call in the right way,” he said.

In addition, many customers used fake documents to borrow money. It was necessary to enhance the responsibility of borrowers to make the market more transparent and prevent fraudulent activities, he added.

Both lenders and borrowers played the role in promoting the development of the consumer credit market, he stressed.

Nguyễn Hoàng Minh, chief representative of the Việt Nam Banks Association in HCM City, said that being equated with usury made it difficult for finance companies to operate.

The lending and debt collection results of some finance companies slumped in the first quarter of this year, Minh said, adding there was an increasing number of employees at finance companies quitting their jobs recently due to occupational risks and social prejudices.

Borrowers must be aware of their obligations while companies must improve their debt collection culture, Minh said.

Never have consumer loans been in difficulty as recently. The demand of borrowers was great, but finance companies did not dare to increase lending because of worries about the difficulty of debt collection.

Lê Quốc Ninh, head of the Consumer Credit Club under the Việt Nam Banks Association, said that consumer finance companies were in a lot of difficulty after negative information of companies which were not licensed by the central bank. These companies were licensed by the provincial or municipal departments of planning and investment and operated under the Civil Law and the Law on Enterprise, not subject to the management of the State Bank.

Objectionable debt collection of some consumer lending companies and pawn shops which led to inspection and investigation by the policy negatively affected the image of mainstream consumer finance companies, he said.

Đỗ Minh Hải, general direct of ATM Online, a fintech operating in consumer lending, said that consumer lending was more and more difficult in the context of economic slowdown, difficult business and production affecting the incomes of workers – the target customers of finance companies.

A representative from FE Credit said that the shortage of regulations on borrowers resulted in increasing payment delinquency.

This was not a good thing when finance companies were forced to tighten lending and consumers who had real demand could not access the credit, he said.

According to the State Bank of Việt Nam’s statistics, there were 16 consumer credit companies licensed by the central bank.

Nguyễn Văn Dũng, Deputy Director of the State Bank of Việt Nam, HCM City Branch, said that the list of consumer credit companies and payment intermediary services was published on the website.

He urged consumers to be cautious about usury which was hiding in the shadow of finance companies, such as peer-to-peer lending apps, to avoid being scammed.

More reasonable rates

Besides proposing a legal framework for debt collection to be completed, experts said it was necessary to set lending rates at more reasonable levels for workers and disadvantaged groups.

Economic expert Nguyễn Trí Hiếu said that consumer credit rates of both official credit institutions or informal channels were high. There was a regulation that rates above 20 per cent per year was considered illegal. However, the fact was that no one had actually been prosecuted for lending with rates higher than 20 per cent.

For black credit, the rates could be up to hundreds of per cent.

Credit institutions should design more reasonable rates for workers and low-income earners, said Nguyễn Hoàng Bảo Trân, Deputy Chairwoman of Bình Dương Labour Confederation. — VNS