According to Lawyer Truong Thanh Duc (pictured), Chairman of the Board of Members of BASICO Law Company, there is not a specific agency protecting customers directly when borrowing money online. Therefore, the State needs to quickly promulgate a pilot legal framework for these new service models, avoiding many consequences without legal regulations.

In your opinion, what is the way to identify black credit via the internet or applications (apps) on smartphones?

- In Vietnam, black credit is rampant and popular, especially online lending. In fact, there is no definition of black credit in legal regulations, but it can be defined that black credit as a lending activity that often has at least two of three illegal factors:illegal lending,unlawful interest rates and illicit debt collection.

Firstly, if an enterprise or individual provides a large amount of loansregularly, continuously and professionally as a main business activity,it is illegal lending, because it is not allowed by the State Bank and laws.

Secondly, the unlawful interest rateis in excess of 20% per yearprescribed by the Civil Code 2015.

Thirdly, illicit debt collectionis that the lenderora third partycollects the debt byputting pressure to threaten, by coercion, spiritual terrorism, offending the honor, dignity, health and life of the borrower and their relatives.

In addition, one of the operations of black credit is to use the phrase "finance company" or "financial service" which violates the regulations,if it is not a credit institution, it would be not allowed to use the phrase or the term "finance company".

Besides, borrowing via smartphone apps is a direct way of lending between lenders and borrowers through an online connected technology platform without the participation of credit institutions.But this form of loan has clear signs of crime, the app’s interest rateis only 19% per year, but with accrued fees, the interest rate is actually many times higher.

However, interest rates are only the most recognizable factor but not the most important indicator to identify black credit because of the unreasonable regulation on interest rates from the Civil Code in 2005 and 2015 today.

The real lending interest rate is always the rule ofthe market. It can be seen clearly that credit institutions lend legally but they have the right to "cross the fence" to lend at rates many times higher than 20% per year without limitations.

How is the legal corridor to protect customers when borrowing via the online app specified, Sir?

- With activities related to black credit in general and online black credit in particular, there is not a specialized agency to protect people directly, but only agencies related to the management of operations which participate in protecting the interests of consumers such as the Competition Administration Bureau under the Ministry of Industry and Trade, the banking supervision and inspection agency of the State Bank or the police agency, which play a role in protecting the social security and order;agencieshandling law violations.

It can be seen that the black credit situation is raging mainly because legitimate credit channels have not met the demand for loans. In addition, there are no clear and specific regulations and sanctions, making it difficult to handle violations, both administrative and criminal.

Regarding loan interest rates, the law is not clear. There is no regulation or explanation that apart from the interest rate, it is necessary to accept collecting some reasonable fees.Even violating the ceiling lending interest rate, there are no regulations to sanction administrative violations, except in the field of pawn lending.

The Penal Code 2015 stipulates that anyone in a civil transaction that lends at an interest rate of five times or more of the highest interest rate specified in the Civil Code (i.e. 100%), earns illegal profits from VND 30 million or more, or has been sanctioned for administrative violations in this act or convicted of this crime, which have notremovedthe criminal record but still commit the violation,they are subject to a fineof VND50 million to VND1 billion or non-custodial probation of up to 3 years or a prison term of6 months to 3 years.

Only relying on each criterion ofinterest rate100% per year or illicit profit is only dealing with the slightest error of the three above illegal issues.

Moreover, this provision has notanswered the question of what fees are included in interest rates and why credit institutions have the right to lend at rates many times higher than other "civil transactions"?

Therefore, people have to protect themselves when borrowing, they must anticipate risks, consider the ability to repay principal debts and especially pay interest with sky-high interest rates.

Since mid-2020, the State Bank has announced to consult the draft regulations on a controlled testing mechanism for financial technology (fintech) operations in the banking sector. How do you evaluate this issue?

- It is estimated that there are currently over 50% of applications for lending by phoneor connecting borrowers and lenders in the lendingform by app originating from abroad. Therefore, State management agencies need to quickly promulgate a pilot legal framework for these new service models, which should not prolong oravoid the activity to stay out of the law.

Furthermore, this legal framework will create a fair opportunity for companies to access and participate in providing financial services through apps.

For example, peer-to-peer lending (P2P lending), if its operation is like a channel connecting supply and demand between lending and borrowing small capital in the majority of the public, with the nature of "micro-credit" or "people's credit”, it will make an important contribution to repel black credit.

However, this model contains many hidden risks, especially when there is no specific legal corridor. It is necessary to stipulate in the direction of encouraging development and at the same time accepting the risks of the online lending model.The most important issue is openness and transparency to minimize cheating, fraud, and the willingness to accept the rules of the market, allow failure and bankruptcy at any time, but cannot stop black credit by methodical, strict and safe operations like credit institutions.

Thank you Sir!

Mr. Pham ToanVuong, Deputy General Director of Bank for Agriculture and Rural Development (Agribank): Promoting credit for rural areas

To prevent black credit, Agribank has implemented a consumer credit program of VND5,000 billion, customers with legitimate loan demand are disbursed within a day with a maximum loan amount of VND30 million. By the end of September 2020, 408,898 loans were given to customers, loan sales reached VND18,645 billion, outstanding loans reached VND2,525 billion. In particular, since the end of 2019, Agribank has had a program for lending overdraft cards in the rural market (used to pay for goods and services).

Financial expert - banking TS. Can Van Luc: A pilot study to bring into play the positives

The form of lending via apps is peer-to-peer lending (P2P Lending) - a direct loan between the lender and the borrower through a digital platform connected online without financial intermediation. This form of lending contains many risks due to the lack of legal corridors. Therefore, the management agency needs to raise all the issues to pilotresearch of the lendingform through this technology company, in order to limit, prevent negatives and promote the positives.

Minh Chi (record)