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"I borrowed 100,000 yuan and paid 29,000 yuan in service fees! How could I be so stupid to believe what he said at the time."

A woman borrowed 100,000 yuan and paid 29,000 yuan in service fees.

Ms. Xiang from Chengdu, Sichuan, recalled her experience of being cheated to the Legal Daily reporter and couldn't help choking up. In June this year, she received a call from someone claiming to be from the "XX Bank Loan Center". Because she needed funds to turn over, Ms. Xiang agreed to meet with the other party to understand the situation.

When she arrived at the agreed location, Ms. Xiang found that the address was not a bank but an office building. A salesperson said that the annual interest rate for a loan from them was 2.8%, and the service fee was 1% of the total loan amount, which was much lower than the market average. After repeatedly confirming with the other party that the service fee was only 1 percentage point, Ms. Xiang decided to take out the loan.

A few days later, she was taken to the bank by the salesperson to go through the loan procedures and successfully borrowed 100,000 yuan, but the annualized interest rate was not the 2.8% promised at the time but 5%. The other party also said that the loan must be withdrawn in cash on the grounds that they wanted to cut off the flow of funds, and asked Ms. Xiang to withdraw 50,000 yuan on the spot and go back to the company to go through the procedures to increase the loan amount and reduce the interest rate.

When she returned to the office, Ms. Xiang saw a sturdy man with a crew cut and dark skin sitting inside. When he saw her, he threw the signed contract on the table and said he would charge her 29,000 yuan. "I was stunned at the time. After reading the contract, I found that it was written that the service fee was 1% per month, for a total of 36 installments. The man also said that in order to compensate me for the interest rate difference, he would charge me 29,000 yuan at the end. If I choose not to take out a loan now, I will have to pay a penalty of 15,000 yuan."

Ms. Xiang discovered that the address of the loan center was not a bank, but an office building.

Ms. Xiang told the reporter that she was alone in a room with several men, some of whom were "gangsters" with fierce faces and were ready to let her go without paying. She had no choice but to pay 29,000 yuan on the spot. After leaving the office building, she immediately called the police. With the coordination of the police, the other party returned 17,000 yuan. "The loan they gave me has an annual interest rate of nearly 5%. I could have applied for it myself. Now I have lost 12,000 yuan for no reason. I really regret it!"

Ms. Xiang is not the only one who has lost a lot of money in a loan fraud. Recently, several people have reported to reporters that they have been tricked by bad loan companies and charged high service fees. In response to the problems they reported, reporters conducted investigations and interviews.

Mass SMS Fake Interest Rates

Many people have encountered loan scams

"The bank's policy has changed. Based on the evaluation, we can give you a reserve fund of RMB XX,000. It can be withdrawn at any time within three years. Please reply in time. Reply 1 to inquire about the interest rate, reply 2 to process. If you refuse, please reply R."

In April this year, Ms. Liu from Chengdu, Sichuan received such a text message. She needed money so she replied to the text message as required. Not long after, she received a call from someone claiming to be an employee of ×× Bank, who said that he could help her with a loan at a very low interest rate, without any handling fees, and that they could meet at ×× Bank if she wanted the loan.

Ms. Liu believed it and went to wait in front of ×× Bank with her husband at the agreed time. However, when the other party arrived, they were taken to an office building opposite the bank and "said that the credit department had a separate office area."

Ms. Liu and her husband both have good credit records and good jobs. They had previously learned that the annualized interest rate of low-interest bank loans was generally above 3%. After they sat down in the office, a salesperson quickly came to introduce them to a renovation loan product from a certain bank, saying that the annualized interest rate was only 1.9%, and that they would not charge any fees if they operated directly on the mobile app.

"The salesperson asked us if we could provide the renovation certificate ourselves. If we could, it would be done directly. If we couldn't, they would provide the renovation certificate for us, but they would charge a fee of 0.4% of the total loan amount. I immediately asked him if I only had to pay 2,800 yuan in certificate fees for a loan of 700,000 yuan?" After getting an affirmative answer, Ms. Liu decided to take out a loan. What she didn't expect was that the so-called "certificate fee" was "played with" by the other party.

According to Ms. Liu's recollection, the other party quickly took out a contract, saying that it was related to applying for renovation loans and renovation voucher fees. When signing the contract, Ms. Liu noticed some things that were wrong, but they were all resolved by the salesperson one by one: when signing the contract, the salesperson directly turned to the signature and seal area and guided the two to press their fingerprints; there was only one copy of the contract, and after Ms. Liu questioned it, the salesperson said, "If you really want it, I will give you a copy later"; when it came to the line about charging, the salesperson deliberately covered the first few words with his fingers, "Just listen to my explanation of this sentence, it means a one-time charge of 0.4%"; the contract did not specify the interest rate, and the salesperson explained that "I am not sure whether it will be 1.9% or 1.8% in the end, and I will give you a supplementary agreement after it is completed."

The cramped and damp room, the noisy inquiries outside the door, the constantly urging salesperson, under all kinds of ambient sounds and the salesperson's constant "no problem" and "sign quickly", Ms. Liu and her husband looked at each other and felt that they could continue with the process, so they signed the contract first.

"After signing the contract, the salesperson took my husband's phone and operated it. We were sitting across from the big table and couldn't see clearly what he was doing. Then another salesperson took us to the bank for a face-to-face interview. The bank account manager didn't communicate with us at all. He gave us a piece of paper to sign and took our ID cards for copying. After taking a photo together, the salesperson took us away from the bank." More than an hour later, Ms. Liu opened the App and found that although the loan was 700,000 yuan, the interest rate was 3.4%, and it was repaid in 12 installments. "We asked the salesperson why the interest rate was not 1.9%. He said that we had to wait until the decoration certificate was uploaded before we could lower the interest rate and term. Then he took us back to the office building."

What Ms. Liu didn't expect was that her nightmare would begin when she returned to the office building. "They said that we needed to transfer the money to the decoration company before they could issue us a decoration voucher. They directly swiped 400,000 yuan through the POS machine, but only transferred 225,000 yuan back to us later. They gave us a receipt for the deducted 175,000 yuan, saying that they would return the full amount to us later." Ms. Liu and her husband realized something was wrong on the way home, and they took out the copy of the contract, only to find that the salesperson had deliberately obscured the content when signing the contract, which was "the monthly repayment consultation fee is 0.4% of the actual loan amount", which means that they need to pay the other party 2,800 yuan per month.

Ms. Liu realized she was cheated only after she signed the contract. Pictured is RMB

After realizing she was cheated, when Ms. Liu communicated with the other party again, the other party’s previous good attitude disappeared completely and resolutely refused to refund. He said that either the consulting fee of 67,200 yuan would be deducted according to the contract (the consulting fee was 2,800 yuan per period, and the contract stipulated a period of 24 periods, which was different from the repayment plan on the App), or 15% of the loan amount would be deducted as liquidated damages if the loan was not made. Ms. Liu chose to call the police, but she found another trap set by the other party: the supplementary agreement stated that "the interest rate for applying for a loan for the customer shall not exceed 1.9", and there was no "%" or "annualized interest rate". Since the contract was signed in black and white, the police handled it as an economic dispute and mediated and negotiated for both parties. In the end, Ms. Liu gave the other party 35,000 yuan.

"I know that some loan intermediary companies will charge a certain amount of intermediary fees, but I cannot accept this kind of company that claims to provide 'direct bank loans', 'ultra-low interest' and 'no additional fees' and then uses various tricks to charge a large amount of service fees in disguise." Ms. Liu said that she could not swallow this breath, and at the same time, she did not want more people to be deceived, so she simply squatted at the original "contact point" for the next few days. When she saw people waiting in front of the bank being pulled into the office building by suspected salesmen, she rushed up to dissuade them. After several attempts, the other party returned the remaining 35,000 yuan.

The reporter recently searched for keywords such as "loan scam" and "loan intermediary" on social platforms and found that many people have had similar experiences of being deceived. Some loan assistance companies will send text messages promising "low-interest loans" in batches, contact the parties after receiving inquiries, claiming to be "bank staff", and require the parties to sign contracts offline to handle loan business. Some of these parties have normal credit, but they borrow money from them for low interest rates; some of them have "spent" their credit (bad credit or too many credit inquiries by financial institutions), and because the other party promised a low interest rate and guaranteed the loan, they had further contact with the other party. Once a response is made, the bad loan assistance company will begin to set traps step by step, and eventually swindle high intermediary fees and service fees.

It is worth noting that, judging from the information provided by the interviewees, the contract they signed did not clearly state the specific amount of the loan, but rather vaguely stated a numerical range of 50,000 to 100,000 yuan or 500,000 to 1 million yuan; the important charging standard, such as "monthly", was "hidden" between the densely packed words; the contract service period was usually inconsistent with the final loan period, for example, Ms. Liu borrowed 12 installments, but the contract period was 24 installments. The companies they contacted were mostly named certain business consulting companies or business service companies, but their business scope in the corporate registration information did not include financial services.

Many parties said that after paying the company's huge service fee in one lump sum, they still had to repay the interest to the lending institution, and these interest rates were the same as the normal market interest rates, not the ultra-low interest rates originally promised by the company. Other parties also reported that when problems were found during the contract signing process, these companies would use methods such as blocking the door with multiple people and using soft and hard threats to force the parties to sign the contract.

A contract signed under duress is invalid

It is difficult to protect rights

What laws may be violated by the various tactics used by bad loan assistance companies?

Ren Chao, a professor at the School of Economic Law of East China University of Political Science and Law, believes that the commercial promotion behavior of loan assistance companies impersonating banks to send out loan marketing text messages in bulk constitutes false advertising, which violates Article 8, Paragraph 1 of the Anti-Unfair Competition Law, which stipulates that "business operators shall not make false or misleading commercial advertisements about the performance, function, quality, sales status, user evaluation, honors, etc. of their products, and deceive or mislead consumers." It also violates Article 4 of the Advertising Law, and in serious cases may constitute the crime of false advertising as stipulated in Article 222 of the Criminal Law.

"The loan assistance companies that promise 'low-interest loans' are actually tricking parties into signing high-service fee contracts, making their financing costs dwarf those of usury. This violates Article 148 of the Civil Code, which states that 'if one party uses fraud to make the other party perform a civil act against his or her true intention, the defrauded party has the right to request the People's Court or arbitration institution to revoke it.' If the amount is large, it may also constitute the crime of fraud or contract fraud stipulated in the Criminal Law." Ren Chao said.

Zhang Zhigang, an associate researcher at the Institute of Law of the Chinese Academy of Social Sciences, introduced that my country's Civil Code, Personal Information Protection Law, and Cybersecurity Law all require that no organization or individual shall steal or otherwise illegally obtain personal information. In order to attract customers, bad loan assistance companies often adopt a telephone marketing model for promotion. In this process, it is inevitable to obtain citizens' personal information (such as name, telephone number, etc.) first. If a loan assistance company uses illegal means to obtain citizens' personal information, it not only violates the above laws, but once the number of illegal acquisitions reaches a certain standard, it may constitute the crime of infringing citizens' personal information as stipulated in the Criminal Law. If the parties refuse to sign the contract, if the loan assistance company uses violence, threats and other means to force the parties to sign the contract, it may be suspected of constituting the crime of forced transaction.

Zhou Jincai, executive deputy director and director of the Criminal Compliance Business Center of Beijing Deheheng Law Firm, told reporters that loan intermediaries are currently a high-risk industry with frequent violations of laws and regulations. In practice, if the personnel of loan assistance companies instigate, assist or jointly forge credit information and provide it to financial institutions when helping borrowers to obtain loans from financial institutions, they may constitute accomplices in the crime of defrauding loans or loan fraud.

Regarding the loan facilitation scams reported by the parties, even if the lender has discovered something wrong, the loan facilitation company will use both soft and hard tactics to force the parties to sign the contract. The experts interviewed believe that in terms of contract effectiveness, if one party uses fraud or coercion to force the other party to perform a civil legal act against their true intention, the defrauded or coerced party has the right to request the People's Court or arbitration institution to revoke it. However, in practice, it is often difficult for the parties to protect their rights.

Zhang Zhigang said that the party who claims that the contract is revocable must bear the burden of proof to prove that the other party has committed fraud or coercion. The parties in such cases are often in a weak position. In addition, some parties did not retain relevant evidence during the signing process, and it is difficult to collect direct evidence to prove that the loan-assisting company has committed fraud or coercion.

"It is also difficult to exercise the right in time." Ren Chao said that Article 152 of the Civil Code stipulates that the right of revocation that a party may exercise under duress is within one year from the date when the duress ends. However, in reality, the parties are in a weak position in information after signing the contract, which leads to a weak awareness of exercising the right, or they swallow their anger or are frightened. If the right is not exercised within the above period, the right of revocation will be extinguished. In practice, the parties should report to the public security organs in time, keep relevant chat records, or request the People's Court or arbitration institution to revoke the contract in time after signing the contract, and do not swallow their anger and increase losses.

"The parties involved need to bear the burden of proof in the process of defending their rights, and they also need to spend a lot of time and energy. Therefore, it is best to reject illegal loan intermediaries from the beginning and handle credit business through formal channels. You can inspect loan intermediaries through on-site inspections, inquiries into industrial and commercial registration information, etc., and you should pay attention to whether their cooperative lending institutions are qualified formal financial institutions. You should always be cautious during the contract signing process, and collect and retain relevant evidence. Be wary of loan intermediaries' propaganda such as "low threshold" and "low interest rate", and reject their requirements such as "prepayment" and "flow of funds". "Zhou Jincai said.

Improve standards and strengthen guidance

Working together to purify the financial market

Regulators are stepping up efforts to crack down on rampant loan facilitation scams.

As early as 2022, the former China Banking and Insurance Regulatory Commission issued a risk warning stating that in the loan market, some illegal intermediaries impersonated banks and used false propaganda such as formal institutions, no mortgages, no guarantees, low interest rates and free of charge, and whitewashing credit reports to induce consumers to apply for loans. In fact, behind these attractive conditions are high fees, loan scams and other routine traps.

In December 2023, the Shanghai Regulatory Bureau of the State Financial Supervision and Administration, the Shanghai Higher People's Court, the Shanghai People's Procuratorate and others jointly issued the "Announcement on Preventing Illegal Lending Intermediary Risks and Regulating Financial Marketing Behaviors"; in January 2024, the Shanghai Market Supervision Administration imposed a fine of 300,000 yuan on a Shanghai management consulting company for illegal activities such as sending loan marketing text messages in the name of a bank, using third-party AI voice robot software to automatically make marketing calls, and illegally collecting personal information.

How can we eradicate the loan facilitation scams that exist in the market?

In March 2023, the former China Banking and Insurance Regulatory Commission issued the "Notice on Carrying out Special Governance Actions against Illegal Loan Intermediaries", encouraging all banking financial institutions to establish a loan intermediary blacklist system, and to include intermediaries who induce or help borrowers to apply for loans in violation of regulations in the cooperation blacklist.

To crack down on and manage illegal loan intermediaries, Zhou Jincai believes that it is necessary to establish and improve industry standards and norms for loan intermediaries, strengthen industry supervision and self-discipline through the establishment of industry professional committees, and take measures to guide and encourage the development of compliant loan intermediaries.

Ren Chao observed that in recent years, the ways in which bad loan assistance companies have impersonated banks with the help of electronic smart devices such as mobile apps, QR codes, and AI voice robots have become increasingly complex, varied, covert, and cross-regional, seriously infringing on the legitimate rights and interests of borrowers and disrupting the order of the financial market.

"Local financial regulatory departments, market regulatory departments, and network regulatory departments need to carry out joint rectification with judicial organs in order to better investigate the legal responsibilities of relevant organizations and individuals in accordance with the law and work together to purify the financial market. Banking financial institutions and other loan marketing institutions should strengthen industry self-discipline and internal risk control mechanisms. They can learn from the local experience of Fujian Province in regulating loan marketing text messages in its jurisdiction, establish a loan marketing text message number whitelist and contact mechanism, text message marketing compliance management mechanism, cooperative institution marketing management specifications, and text message marketing loan monitoring mechanism." Ren Chao said.

Zhou Jincai reminded that it is necessary to strengthen legal publicity and education, guide the public to enhance risk prevention awareness, pay attention to personal information protection, and at the same time establish rational consumption and lending concepts, learn to identify formal loan intermediaries, or go directly to banks and other formal financial institutions to handle loan business. At this point, special attention should be paid to regulating the diversion of online platforms to loan intermediaries and lending institutions.

(Source: Legal Daily)