(Yicai) Sept. 16 -- China's financial regulators have shone a light on a credit fraud scheme built on so-called professional debt-bearers -- individuals recruited by intermediaries to fraudulently obtain bank loans -- in which the ringleader has been sentenced to 16 years in prison.

Between July 2019 and May 2020, a criminal gang led by a man surnamed Ning recruited 11 individuals who could not repay loans, forged their home down payment documents, and used them to fraudulently obtain mortgages worth CNY7.4 million (USD1 million), the National Financial Regulatory Administration said yesterday. Apart from a long jail term, Ning was also fined CNY800,000 (USD112,420) for loan and credit card fraud.

The other gang members were handed prison sentences ranging from three years to 11 years and six months, and were also financially penalized, the NFRA noted. The gang illicitly acquired CNY7.4 million (USD1 million) through the debt-bearers.

In addition, the ringleader also acquired credit cards through the 11 borrowers and used them for personal spending, with the total outstanding debt reaching CNY5.8 million.

This shadow credit market has formed into a tightly coordinated network, luring low-income groups, the unemployed, and struggling business owners with promises of high returns, and turning them into professional debt-bearers. Some gangs have illicitly extracted hundreds of millions of yuan (tens of millions of US dollars) this way, backing up the loan applications with forged asset and income documents.

After a loan is made, the intermediaries take a cut, pay a little to the debt-bearer, and transfer the rest to their client. These professional debt-bearers are then legally and financially on the hook for the loans, leading to regulatory warnings and criminal prosecutions.

In such cases, illegal loan intermediaries play a crucial role in organizing and planning the crimes, including recruiting personnel, creating falsified documents, and liaising with banks, the NFRA said. These schemes are highly replicable, often enabling repeated offenses in a short period of time, causing serious harm to society, and must be severely cracked down on, it added.

The NFRA, the People's Bank of China, and the China Securities Regulatory Commission yesterday launched a week-long financial education campaign to raise public awareness and emphasize the importance of guarding against the harms caused by illicit financial acts.

Editors: Dou Shicong, Martin Kadiev