(Yicai Global) May 26 -- China’s largest debt collection agency said yesterday that it would close due to law enforcement, drawing attention to the violent nature of the business. The person in charge of the firm revealed that standards to regulate the industry are expected to be introduced in the third quarter of this year.
Hunan Yongxing Asset Management, one of China’s leading debt collectors, noted in a statement that 179 of its employees have been detained by the police since last month, with three of them arrested for picking quarrels and provoking trouble.
China’s debt collection industry has lacked unified standards for a long time, dogged with violent collections and harassment of debtors that bring stigma to the whole industry, the person in charge at Hunan Yongxing pointed out.
The new regulations, entitled Risk Control Guidelines for Debt Collections, have undergone several rounds of revisions and adjustments, and its current content is deemed to be relatively perfect, a head of the National Internet Finance Association of China told Yicai Global.
The authorities are still soliciting opinions from the industry, with some more changes likely, the NIFA official said, adding that if all goes well, the formal standards are expected to be unveiled in August.
Hunan Yongxing was established in 2014 and submitted a listing prospectus to the United States Securities and Exchange Commission in 2019, but ultimately failed to go public. According to information in its closure announcement, its headcount has now dropped to 2,000 from 17,000 before the Covid-19 pandemic.
Debt collection itself is an important part of debt management, so it is necessary to develop standards to guide institutions and clarify the boundaries of all parties, the person at Hunan Yongxing added.
The new standards will for the first time propose the classification of informative collection and interactive collection. The former does not require debtors’ to reply and has little impact; while the latter requires communication between both parties to urge debtors to fulfill their obligations, the person said.
To strengthen the protection of debtors, the document will set strict rules on interactive collection. These include limiting debt collection by phone or voice communication to three times a day for each debtor, the number of collectors should not exceed three during on-site communication, and collectors are not allowed to enter debtors’ homes and offices without consent.
After the document is released, the National Internet Finance Association of China will evaluate firms’ implementation of the standards and publish a white list of those that passed muster so as to provide guidance for financial institutions to select third-party collectors, the person noted.
Editors: Dou Shicong, Peter Thomas