Chinese lawmakers have approved new regulations to help stem the rise in credit card defaults in that country.
The minimum card-default amount to qualify as a criminal case now is 10,000 yuan (US$1,462 or 1,192 euros), according to the new rules issued last week by Supreme People's Procuratorate and the Ministry of Public Security in Beijing. Violators face fines and prison terms of varying degrees. No minimum previously existed that classified a card default as a criminal case.
Additionally, prosecutors also may charge borrowers who fail to pay their card debts within three months after receiving their second past-due notice. Borrowers in default by less than 100,000 yuan, however, are exempt if they pay back the principal and interest before going to trial.
Funds linked to credit card defaults in the first quarter of this year reached 8.8 billion yuan, up 14.4% from 7.7 billion yuan the previous quarter, according to the central bank. Figures for the first quarter of 2009 were not available.
Though the new regulation is designed to help control the rise in defaults, they likely will have little effect, Dong Zheng (Dong is the family name), a consultant who specializes in bankcards at Shanghai Bank’s Industrial Co. Ltd., a financial service provider, tells PaymentsSource.
“First of all, it's not a law; it's a rule. China has no credit card laws so far,” he says, noting it is impractical for banks to track down all borrowers in default given that the huge number of migrant workers in the nation. “It costs too much for banks on human and financial resources to deal with each default case.”
Meanwhile, Hong Kong, a special administrative region within China, is seeing a period of cooling off in credit card borrowing, which declined during the first quarter, according to figures from its top monetary authority.
The amount of borrowing by credit cardholders in Hong Kong during the first three months of this year totaled HK$20.3 billion (US$2.6 billion or 2.1 billion euros), down 3.8% from HK$21.1 billion during the same period last year, according to the Hong Kong Monetary Authority.
The amount issuers charged off declined by 22.2%, to HK$439 million from HK$564 million. Funds delinquent declined by 9%, to HK$232 million from HK$255 million. The delinquency ratio (a ratio of past due card loans to total card loans) declined to 0.32% from 0.34%, data from the authority show.
The transfer of rescheduled receivables outside the surveyed institutions’ credit card portfolios declined by 25.4%, to HK$209 million from HK$280 million. Rescheduled receivables represent the amount of receivables retained in card portfolios not captured as delinquent at the end of the quarter.
The combined delinquency and rescheduled rate (after taking into account the transfer of rescheduled receivables) declined by a basis point, to 0.45% at the end of March from 0.46% a year earlier.
The declining effect of Chinese New Year spending and consumers becoming more cautious in using credit cards drove the decline in card debt during the quarter, an official from the monetary authority tells PaymentsSource.