Bad debt alarm, finance company wants debt collection service to operate again

By the end of February, consumer credit growth was negative, down 2.5% compared to the end of last year. At the same time, bad debt at financial companies is currently nearly 15%, at an alarming level.

Speaking at the workshop “Improving the soundness of consumer lending and regulations and debt collection practices” on the morning of April 16, Vice President and General Secretary of the Banking Association Nguyen Quoc Hung said that the reason for negative consumer credit growth is due to the decrease in consumer credit demand in the context of difficult economic growth affecting the income of individuals and households, increasing the need to save for the future and reducing the need to borrow bank credit to expand spending.

In addition, the quality of consumer credit has been deteriorating. The handling and recovery of bad debts by credit institutions, especially by financial companies, has encountered many difficulties. Many companies have fallen into difficult situations, even suffering losses due to high risk provisions.

"Increasing bad debt is not only due to objective factors and general difficulties of the economy, but also subjective factors such as customers intentionally not paying their debts, forming "debt default" groups on social networks, opposing and slandering debt collection officers, negatively affecting the image and reputation of banks and financial companies, and greatly affecting the psychology of debt collection officers," Mr. Nguyen Quoc Hung emphasized.

Mr. Nguyen Hong Quan, Member of the Banking Association Council, Deputy General Director of TP Bank, said that in the first months of 2024, credit growth was the lowest in the past 4 years. Consumer credit is the driving force for credit growth but has narrowed outstanding debt.

The main reason is that debt collection activities are difficult, due to the borrowers' poor debt repayment awareness, borrowers intentionally do not repay debts; intentionally oppose, denounce, and slander debt collection officers; There is no legal corridor for consumer finance debt collection activities, leading to commercial banks and financial companies not having tools to collect debts.

Along with that, bad debt increased, commercial banks and financial companies had to set aside large provisions, during a period when the economy was facing many difficulties, leading to forced narrowing of growth plans.

According to credit institutions, currently, the Investment Law 2020 prohibits debt collection services, while this is an essential need for effective loan management.

Therefore, the leaders of the Consumer Finance Club recommend that the State Bank study and develop a legal corridor to allow and control the provision of professional debt settlement services.

According to Mr. Le Quoc Ninh, representative of the Consumer Finance Club , although prohibited under the Investment Law 2020, debt collection activities have not disappeared but have become transformed when not bound by investment and business conditions as before.

Currently, the Vietnamese market still lacks professional debt settlement services, while this is a popular field in many developed countries. Therefore, Mr. Ninh believes that this activity should be planned as a conditional business line, with clear and transparent regulations on the conditions for establishment, operation, and clear control mechanisms instead of being banned as it is now.

Along with that, Mr. Ninh also recommended that competent authorities develop specific and unified guidelines to handle and prosecute criminal liability for acts of intentionally evading debt repayment obligations.

Mr. Nguyen Hong Quan also proposed to study and build a legal corridor to allow professional intermediary debt collection organizations to collect debt, supporting commercial banks and financial companies in the consumer lending process.

Mr. Quan also agreed that there should be solutions to raise awareness and responsibility of borrowers; build a citizen credit scoring system; and make consumer lending activities transparent. Commercial banks and financial companies need to agree to negotiate to make common statements on sanctions for intentionally delaying debt repayment.

The Banking Association also expects that in the near future, the integration of electronic identification will support credit scoring for individual customers, contributing to raising people's awareness and responsibility. In addition, the legal framework for debt collection also needs to be completed soon so that debt collection activities can be carried out more smoothly and effectively.

“In short, dealing with bad debt, unblocking credit flows, and promoting consumer lending are urgent issues today. This is an opportunity for us to find effective solutions, and at the same time make recommendations to competent authorities to support and create conditions for credit institutions to develop healthily and sustainably, helping consumer credit increasingly become an effective capital channel for people,” Mr. Nguyen Quoc Hung emphasized.

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