In April, Ho Chi Minh City police had arrested two Chinese nationals and three Vietnamese accomplices running a million-dollar loan racket charging 90 percent monthly interest, 54 times the highest rate allowed in Vietnam.

The group had been operating for six months, giving loans worth over VND100 billion ($4.3 million) to 60,000 borrowers via mobile apps.

They employed nearly 40 employees who offered people fast and easy loans without much paperwork. However, if the repayment was late, the staff would contact the borrower’s relatives, colleagues and friends to insult and threaten them to pay up.

HCMC police said that this was one of five loan shark rings that they had been investigating recently. Most of the rings are run by Chinese nationals, they added.

These rings typically offer loans of around VND2-5 million ($86-215) each at interest rates of up to 150 percent a month, far exceeding the maximum 20 percent a year or 1.67 percent a month that the government allows.

The city police have arrested 12 Chinese nationals and are looking for more. They have not identified how many Chinese companies as loan sharks in Vietnam, but Nguyen Hoa Binh, chairman of tech firm NextTech Group, estimated that there were 60-70 Chinese loan shark companies operating under Vietnamese proxies.

"Last year when China tightened peer-to-peer lending, loan shark operators moved to Southeast Asian countries, including Vietnam where a legal framework for this type of lending has not been fully established," he told local media.

HCMC police in September last year arrested a group of six Chinese and three Vietnamese nationals for loan sharking via mobile apps. The group was operating two companies with 30 employees, providing loans at an interest rate of 4 percent a day, or 120 percent a month.

Earlier this month, HCMC police began investigating two companies operated by Singaporean group Cashwagon Pte. Ltd. for lending money via mobile apps at monthly interest rates of up to 44 percent.

These companies often use tricks to avoid legal consequences of loan sharking in Vietnam, which can go up to VND1 billion ($42,900) in fines or jail time of three years.

Industry insiders say that they also charge borrowers "fees" for each loan, such as service fees and copyright fees, which are actually interest rates in disguise.

Money in minutes

The main reason borrowers apply for a loan from them is because they need quick money but want to avoid the trouble of paperwork demanded by banks.

Within a few minutes they can receive funds transferred directly to their bank account, but in return, they need to provide their ID, phone number and allow the app to access their phone directories.

Many have become victims to these rings. A 24-year-old woman in the central highlands province of Dak Lak said that she borrowed VND5 million ($214) in May last year, and by October the amount of money she needed to pay doubled to VND11 million ($472).

"They called my friends and my family, even my 80-year-old grandfather and insulted them."

Fintech company leaders have been calling for more stringent measures to stop loan shark rings in order to protect the 40 peer-to-peer lending firms which are operating legally.

NextTech chairman Binh said that these companies were different from peer-to-peer lending firms because they do not seek depositors, only borrowers. This meant their money comes from investors elsewhere, mostly China, and not other app users.

They often illegally use logos of popular banks in Vietnam to trick people into believing their services are legal, he added.

Tran Viet Vinh, CEO of lending firm Fiin, estimated that Chinese companies account for 60 percent of credit provided via mobile apps in Vietnam.

The operation of these loan sharking rings will give authentic peer-to-peer lending companies a bad reputation, he said.

"People might think that all peer-to-peer lending services are loan sharks and will eventually stop using these services all together," he said.

He said further that the loan shark rings will create more roadblocks in the development of a legal framework for the fintech industry.