China trains professional debt collectors as bad loans mount

China has trained the first batch of 100 debt collectors as the profession, key to the recovery of many debt-ridden Chinese banks and financial institutions, is seeking legal status after the government outlawed it in 2000 due to cases of violence.

The training programme was launched by China Employment Training Technique Instruction Centre (CETTIC), under the Ministry of Labour and Social Security, in April. The first batch of graduates qualified in late August.

While it remains illegal to operate a debt collection business, it is hoped that an increase in trained and qualified collectors who operate within the law can be a solution to China's debt problems.

For example, the China Banking Regulatory Commission at the end of June put bad loans of the nation's banks at a whopping 1.28 trillion yuan (USD 150 billion).

The training programme is a sign China will gradually adjust and standardize the market, the state media quoted experts as saying.

People who have been trained and given a license will be required to work in a strict and legal way. They must call the debtor first, and then send letters. If the two steps fail, they can take further legal measures.

Teachers for the training programme include professors of related majors, lawyers and psychologists, according to the CETTIC. People attending the training programme must have a minimum of a high school education.

"People always regard us as an underworld group, and link us to illegal activities such as violence, intimidation, and even kidnapping," said Zhao Qian, head of a debt collection company in Beijing, using an assumed name.

Although his company is registered as a commerce and trade enterprise, his main business is to ask for debt payment on behalf of banks, companies, and even individuals. In Beijing, there are about 300 companies like Zhao's that are waiting for a legal license for their business, the 'Beijing News' reported yesterday.

These companies recover debts of nearly 100 million yuan (USD 12 million) per annum.

Zhao admitted that sometimes they have to use violence. "Many debtors are so shameless. You cannot get the payment through normal measures." It is inevitable that there will be some stories of violence during debt collection, he said. His employees have often been arrested due to illegal actions, he said.

Violence was the main reason for the Chinese Government to make debt collection companies illegal in 2000.

However, according to Chinese law, it is legal to entrust a person to demand payment of a debt.

Therefore companies such as Zhao's can hire people to work as debt collectors.

In China, the credit system remains basic, and there is no specific law covering the issue. Many financial institutes and companies still have no special departments to recover debts.

Experts say China needs at least one lakh debt collectors.

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