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November 4, 2016

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Uber-style format, dubious bounty hunters

WEARING a nondescript plaid shirt, Sun Zhijian steps into a dimly lit lane in Shanghai’s Hongkou District, following information provided on his iPhone. He’s tracking a 33-year-old man named Zhang Wenjian, who owes lenders 850,000 yuan (US$125,442).

On this day, Zhang gave him the slip.

Sun is a debt-collector in a business that tends to be reviled as menacing and heartless. But he doesn’t see it that way. The former office clerk in his twenties started debt-collecting as a part-time job, similar to the way a neighbor of his decided to become a part-time driver for the ride-hailing app service Uber.

“I am the Uber of debt collection,” Sun told Shanghai Daily through the online chatting application QQ.

His source of work comes from Renrencui, which literally means “everyone collects” and is a sub-platform of online peer-to-peer lending site Jiedaibao.

Renrencui was engulfed in controversy earlier this year when it was accused of requiring students to provide nude selfies as collateral for loans. Now, for borrowers welshing on debts, the platform has started to release their full names, phone numbers, addresses and ID numbers to attract debt collectors.

Sun isn’t much bothered by privacy issues. Instead, he and others are attracted to a business with low entry barriers and high returns. In a sense, they are online bounty hunters.

If Sun had been lucky to catch Zhang and persuade him to pay off his debts, he would have stood to get about 25 percent of the repayment as reward. Or so the platform promises.

More than 20,000 users like Sun have registered to be Renrencui debt collectors since the function started in June, Jiedaibao said on its official website. Hundreds of QQ chat groups had been set up online to share debt-collection techniques, including repetitive phone calls and threats.

The rise of such Uber-style debt collection services is nurtured by rising defaults of personal loans made via peer-to-peer platforms, following a crackdown on the industry. There is strong demand for unofficial bailiffs who, in most cases, lack training and may be allied with loan sharks.

Despite a whirl of accusations about fraud and information leaks, Jiedaibao insists that the company has signed agreements with its army of debt collectors that stipulate no violence, no physical threats and no verbal abuse.

For his part, Sun said he bought a software program entitled “call you to death” in order to dial Zhang’s number repeatedly.

However, his efforts were later trumped by rival debt collectors who tracked down a new address for Zhang and managed to find his mother. She paid 250,000 yuan of her son’s debt in order to end the face-losing harassment.

Meanwhile, other collectors tracked down Zhang’s ex-wife and harassed her so much that she ended up in hospital, Sun said.

In other QQ chat logs seen by Shanghai Daily, veterans of the business boast to newbies about their tricks of the trade. One of them even shared a template for a T-shirt printing: pay back your debt!

The Chinese government halted the registration of debt collection companies in the mid-1990s. In 2000, multiple government bodies, including the People’s Bank of China and the China Banking Regulatory Commission, officially banned debt chasing throughout the country.

Since then, the industry has thrived in a grey zone of third-party outsourcing services for banks or law firms, trying to keep a low profile from the public spotlight.

Local governments tend to turn a blind eye since China lacks an effective system for lenders to recoup unpaid debts.

In the judicial system, small claims can drag on for years, and even when a ruling is issued, the government doesn’t do much to enforce it, lawyers and former court officials told Shanghai Daily.

Still, many warn that the practices employed by Renrencui are far from acceptable. Without regulation, the ad hoc debt-collection services can easily become hotbeds for swindles and usury. In the worst-case scenario, according to market insiders, you get one group of undesirables chasing another group of undesirables.

“Treating debt collection as some sort of gig-economy could easily backfire,” said Sheng Jieli, a former debt collector for Citi Bank and a market watcher for more than 20 years. “You have to make sure that the whole process, from hiring collectors to teaching ethics, is under control. Otherwise you can’t ensure confidentiality.”

Sheng told Shanghai Daily that the normal process for a third-party company to collect debts for banks requires two trained staff working as a team. It also requires a record of the interaction with the debtor. Renrencui requires no such safeguards.

“With the absence of regulation, small operators and shadow lenders tend to lay more emphasis on the rate of collection than on legal niceties,” Sheng said. “Such behavior will trigger troubles. It’s only the matter of time.”

Looking through the latest list of deadbeats released on Renrencui, Sun is trying to single out his next targets.

“I could do better,” the young man said, after his failed pursuit of Zhang. “Maybe I should start with younger, easier targets.”


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