China Plans to Blacklist and Publicly Shame Defaulting Borrowers

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China’s central government plans to establish a nationwide system for publicly shaming defaulting borrowers by broadcasting their personal details via multiple channels and platforms.

A report by the official Xinhua news agency says that the China Banking Regulatory Commission, the Publicity Department of the Communist Party and the Supreme People’s court will establish a national policy based on existing systems in some Chinese cities that publicly shame “deadbeat borrowers” who default on loan obligations.

The Guangdong capital of Guangzhou has already displayed the personal details of around 140 defaulting borrowers on public screens situated in buses and commercial buildings at the behest of local courts.

In the provinces of Henan, Jiangsu and Sichuan, the courts have ordered telecom companies to play a recorded message each time a defaulting borrower receives a phone call, informing the caller that they are speaking to a blacklisted borrower and requesting that they urge them to properly attend to their legal duties.

Under the new system proposed by the central government borrowers who fail to repay their bank loans will find themselves included on a national blacklist, with their full name, identification number, photograph, residential address as well as information on the sums they owe publicised via multiple channels, including newspapers and online websites, audio-visual media such as radio and television, as well as displays screens installed on public transportation and in elevators.

According to Xinhua local governments have already received orders to establish publicly accessible databases of defaulting borrowers by the end of the year.

Local media will be responsible for the operation of the databases, while the courts will supply the personal details of borrowers, and the banking authority will be entrusted with updates of the blacklist.

 

Xinhua said that the current move is intended to boost the level of “trustworthiness” in Chinese society, by serving as “an important tool in punishing those regarded as untrustworthy.”

This is not the first time that the Chinese government has sought to shame borrowers who fail to make repayments as a deterrent against defaults.

In 2005 Beijing launched a database containing personal information on debtors as part of efforts to deter defaulters, while the Supreme People’s Court began to release the personal details of defaulting borrowers in 2013, shaming over seven million publicly by June.

Angelo Luo, a lawyer with Gold Sun Law Firm in Guangzhou, said to The South China Morning Post that debt evasion remains an endemic problem in the Chinese economy, undermining the credibility of the legal system.

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

Luo remains skeptical of the shaming campaign, however, pointing out that “the effects are limited when we’re talking about people who are totally ignoring the authority of the law.”

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